Exam (elaborations) MBA MKT640

MBA MKT 640 / MKT640 INTERNAL FINANCIAL TRANSFER SYSTEMS Question 1 Leading and lagging is primarily of value because of __________. tax regulations expropriation risk foreign exchange risk exchange and capital controls Question 2 Which one of the following is a real rather than a financial flow? Capital goods Dividends Equity investment Credit on goods and services Question 3 Using transfer prices may lead to __________. exchange rate controls increased local taxes decreased political risk reduced ad valorem tariffs Question 4 The extensive system of foreign tax credits __________. reduces the amount of taxes they owe the host country allows MNCs to avoid double taxation on foreign source income allows U.S. MNCs to lower their effective tax rate on foreign source income to below the U.S. corporate tax rate allows governments to collect more taxes from MNCs Question 5 __________ is the pricing of internally traded goods for the purpose of moving profits to a more tax-friendly nation. Leading and lagging Transfer pricing Arm's length pricing Advanced pricing Question 1 __________ from the subsidiary to the parent is still the MOST important method of transferring funds in the MNC. Dividends Parallel loans Leading and lagging Credit rationing Question 2 The best way(s) to increase the present value of after tax remittances from overseas is (are) to __________. speed up the payment of dividends borrow in the local currency invest parent funds as debt rather than equity hedge exchange risk Question 3 The significance of the multinational financial system is NOT based on the ability to take advantage of __________. financial market arbitrage differing political systems between subsidiaries tax arbitrage regulatory system arbitrage Question 4 Tax arbitrage __________. occurs when firms transfer funds to lower tax jurisdictions occurs due to the incidence of capital flight arises when subsidiary profits vary due to local regulations arises when barriers to trade exist Question 5 One benefit of the use of fees or royalties to manage the MNC’s cash flow is __________. less communications costs less exchange rate risk more favorable tax treatment by the parent country's government less suspicion by the host government Question 6 The extensive system of foreign tax credits __________. reduces the amount of taxes they owe the host country allows U.S. MNCs to lower their effective tax rate on foreign source income to below the U.S. corporate tax rate allows governments to collect more taxes from MNCs allows MNCs to avoid double taxation on foreign source income Question 7 __________ is the pricing of internally traded goods for the purpose of moving profits to a more tax-friendly nation. Arm's length pricing Transfer pricing Leading and lagging Advanced pricing Question 8 MNCs may use __________ arbitrage to resist government price controls or union wage pressures. financial system tax triangular