Question

Which of the following is an example of expropriation when FIs expand internationally? Foreign accounting standards...

Which of the following is an example of expropriation when FIs expand internationally?

Foreign accounting standards may differ from the generally accepted accounting principles used in the U.S.

To develop a strong customer base, FIs must face heavy fixed costs such as acquisition of other local entities.

FIs face substantial political risks in unstable countries.

FIs may be able to diversify risks and obtain greater potential for earnings.

None of the above
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Answer #1

Answer: "FIs face substantial political risks in unstable countries", is the correct option,

Political and Expropriation risk- It is the risk that politics of the foreign country in which company is doing business, may change. Political policies may not be in favor of company, Government actions can negatively affect the cash flows of company. Government may seize the property without compensating the company owner in a total expropriation. It comprises all discriminatory measures taken by the local or state Government.

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