If partial financing is provided by the foreign subsidiary, including foreign interest payments in the cash flow analysis may avoid overstatement of the estimated foreign cash flows.

Question

Quizplus · Accepted Answer

By including foreign interest payments in the cash flow analysis, the estimated foreign cash flows may more accurately reflect the actual amount of cash that will be available to the parent company. This is because partial financing provided by the foreign subsidiary may affect the amount of cash that can be repatriated back to the parent company. Therefore, including foreign interest payments can help avoid overstatement of the estimated foreign cash flows.

If Partial Financing Is Provided by the Foreign Subsidiary, Including