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ensuring the transfer of funds back home in international trade and finance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › ensuring the transfer of funds back home in international trade and finance

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 23, 2020 at 7:03 pm #586479
    jareerabedin
    Member
    • Topics: 91
    • Replies: 72
    • ☆☆

    With regards to international trade and finance in AFM, one of the possible ways a company can ensure that it can transfer funds back home is that it will:

    1- sell goods to subsidiary
    2- Charge royalty to subsidiary
    3- charge high interest on loans to subsidiary.

    If the parent company, cannot transfer high amounts back home due to legal restrictions, how does it benefit by charging more to its subsidiary?

    Isn’t it just accumulating more cash that it can’t send home? Wouldn’t the parent company be able to transfer more money out of the country by buying goods from subsidiary, paying high interest on loans and paying royalty fees and management charges to subsidiary?

    Kindly help

    Thanks

    September 24, 2020 at 8:59 am #586519
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54738
    • ☆☆☆☆☆

    The ‘home country’ is where the parent company is based.

    Those ways of transferring funds are for the situation when the subsidiary is in a foreign country and we want to transfer money back to the home country.

    September 24, 2020 at 4:14 pm #586566
    jareerabedin
    Member
    • Topics: 91
    • Replies: 72
    • ☆☆

    Thank you so much!
    It had me confused for a good minute!

    September 25, 2020 at 8:14 am #586597
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54738
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘ensuring the transfer of funds back home in international trade and finance’ is closed to new replies.

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