Transfer pricing can have an effect on how divisions of an MNC are perceived by the local banks.Which transfer price would leave a local affiliate that imports components from the parent with less impressive financial statements?

Question

Quizplus · Accepted Answer

A high transfer price would leave the local affiliate with higher costs, which would result in lower profits and a weaker financial position. This could negatively affect their perception by local banks who may consider them to be less financially stable or a higher risk for loans. Therefore, a high transfer price would lead to less impressive financial statements for the local affiliate.

Transfer Pricing Can Have an Effect on How Divisions of an MNC