The effect of the risks faced by MNCs is to:
A)decrease the firm's profit potential.
B)increase the need for new sources of foreign capital.
C)decrease the firm's ability to develop a strategy for addressing risks.
D)increase the volatility of cash flow.

Question

Quizplus · Accepted Answer

The risks faced by MNCs can lead to an increase in the volatility of their cash flow. This is because events such as political instability or currency fluctuations can impact the firm's revenue and expenses, leading to fluctuations in cash flow. This can make it difficult for the firm to plan and make strategic decisions for future growth. Therefore, option D is the best choice. Options A, B, and C are not necessarily true, as MNCs could potentially mitigate risks through various strategies, such as diversification or hedging, and may not necessarily need new sources of foreign capital.

The Effect of the Risks Faced by MNCs Is To