The Establishment of a New Subsidiary Is Commonly Considered by MNCs

question 8

True/False

The establishment of a new subsidiary is commonly considered by MNCs because the cost is less expensive than acquiring a foreign subsidiary of the same size.

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Definitions:

Financial Break-even

The point at which total revenues equal total costs, resulting in neither profit nor loss.

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, representing wear and tear, decay, or decline in value.

Contribution Margin

The portion of sales revenue that exceeds variable costs, contributing towards covering fixed costs and generating profit.

Variable Cost

Costs that change in proportion with the level of output or activity, such as raw materials and labor costs.