Diversification is possibly the best technique for reducing the problems associated with international transactions
Provide one example each of international financial diversification and international operational diversification and explain how the action reduces risk.
What will be an ideal response?
Answer: An MNE well known in the financial markets could borrow money in a country in which the firm receives foreign currency. The MNE could then use the receivables to repay the loan in the foreign currency and avoid uncertainties in exchange rates.
An MNE could establish production facilities in several countries. This could be beneficial in at least two ways. First, such diversification reduces the probability of unfavorable changes in exchange rates for one country from significantly reducing the firm's profitability. Second, an MNE with facilities in several countries is well positioned by using internal sources to recognize when a disequilibria in the market arises.
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Answer the following statement true (T) or false (F)
Backflush costing eliminates the need to make journal entries during the period to track cost flows through the production process as the product is made
Indicate whether the statement is true or false
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Fill in the blank(s) with the appropriate word(s).
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Indicate whether the statement is true or false