Which of the following allows a multinational firm to reduce the transaction costs that arise when many transactions occur between its subsidiaries?

Question

Quizplus · Accepted Answer

Multilateral netting allows a multinational firm to consolidate payments and receipts among its subsidiaries, reducing the number of transactions and therefore transaction costs. This is done by offsetting receivables and payables between subsidiaries, which can be settled through a single net payment. Option A (unbundling) refers to separating different activities within a firm to optimize efficiency, Option B (deferral principle) refers to a tax strategy and Option C (fronting loan) refers to a loan where a third party provides the funds, but the parent company of the borrower takes on the risk. None of these options directly address reducing transaction costs.

Which of the Following Allows a Multinational Firm to Reduce