An American aircraft manufacturer has a subsidiary in Indonesia.The subsidiary needs funding to expand its operations.The parent company deposits the required funds in a London based international bank.The money is then transferred to the subsidiary by the bank.The above serves as an example of:

Question

Quizplus · Accepted Answer

This scenario is an example of a fronting loan, where a parent company deposits funds in an international bank, which then lends the money to the subsidiary. This is often done to bypass restrictions on direct loans from parent companies to subsidiaries, especially in different countries.

An American Aircraft Manufacturer Has a Subsidiary in Indonesia