When Members of a Corporate Family Are Located in Different

question 43

Multiple Choice

When members of a corporate family are located in different countries,_________.

• A) taxes are avoided altogether
• B) taxes are handled under international law
• C) transfer pricing affects taxes owed and company profits
• D) transfer pricing does not affect taxes owed but does affect profits
• E) transfer pricing does affect taxes owed but does not affect company profits

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Definitions:

Profit Margin Ratio

A financial ratio that measures the percentage of revenue that exceeds the cost of goods sold, indicating how much profit a company makes for each dollar of sales.

Asset Turnover Ratio

The Asset Turnover Ratio is a financial metric that measures the efficiency of a company in generating sales revenue from its assets.

Return on Assets

This measures how effectively a company uses its assets to generate profit, calculated by dividing net income by total assets.

Disposal

The act of getting rid of an asset through sale, exchange, retirement, or destruction.