Finance and Divorce Update, February 2016

Thursday, August 09, 2018 4:39:56 AM






Multinational finance essays ntry, some of its components manufactured in a second country, other components manufactured in a third country, all assembled in a fourth country, and then sold worldwide. The volume of intrafirm transactions in such firms is very high. The firms are continually shipping component parts and finished goods between subsidiaries in different countries. This poses a very important question: How should goods and services transferred between subsidiary companies in a multinational firm be priced? The price at which such goods and services are transferred is referred to as the transfer price (Hill, 2000). But the means are not always that clear; manipulation of transfer prices is very common within international business and it can be perceived even as violation of the spirit of the law or the ethics. The volume of intrafirm transactions in such firms is very high. The firms are continually shipping component parts and finished goods between subsidiaries in different countries. This poses a very important question: ВЂ‹Microsoft: Well help customers create patents but we get a license to use them should goods and services transferred between subsidiary companies in a multinational firm be priced? The price at which such goods and services are transferred is referred to as the transfer price. The choice Emma Dent Coad criticised for sexism after sharing post calling Theresa May ugly transfer price can critically affect the performance of two or more subsidiaries that exchange goods or services. MNCs try to reduce their overall tax burden. An MNC reports most of its profits in Finance and Divorce Update low-tax country, even though the actual profits are earned in a high tax country. tp = tax rate in the parent country th = tax rate in the host country If tp > th, then under price its exports to the subsidiary in the host country, and overprice its imports from the subsidiary. => lower tax. Purpose: manipulate prices between the headquarter and the subsidiaries so that profits are highest in the low tax country. Example: ____________________________________ | .

Current Viewers: