In theory, the MNE should support ________ debt ratios than a purely domestic firm because their cash flows are ________.
A) lower; more stable due to international diversification
B) lower; less stable due to international diversification
C) higher; more stable due to international diversification
D) higher; less stable due to international diversification

Question

Quizplus · Accepted Answer

MNEs are less vulnerable to country-specific risks due to their international diversification. This allows them to have more stable cash flows and therefore support higher debt ratios. Thus, option C is correct.

In Theory, the MNE Should Support ________ Debt Ratios Than