The reasons that the amount and timing of the net cash flows to the foreign subsidiary and parent may differ include:
A)subsidized loans
B)differential tax rates
C)legal and political constraints on cash remittance
D)all of these

Question

Quizplus · Accepted Answer

All of the choices (subsidized loans, differential tax rates, and legal and political constraints on cash remittance) can affect the amount and timing of the net cash flows to the foreign subsidiary and parent. For example, a foreign subsidiary may receive subsidized loans with lower interest rates, which could result in more cash inflows for the subsidiary but not necessarily for the parent. Additionally, differential tax rates can affect the amount and timing of cash flows between the subsidiary and parent. Lastly, legal and political constraints on cash remittance, such as restrictions on currency exchange and repatriation of funds, impact the timing of cash flows between the subsidiary and parent. Therefore, all of the choices could be the reasons for the differences in the amount and timing of net cash flows.

The Reasons That the Amount and Timing of the Net