Question

how does a firm’s home country affects the capital structure of a firm, elaborate on the use of transfer pricing to minimize taxes, and how firms may reduce their borrowing costs by engaging in euro market transactions.

Answer 1

The transfer of value involves the trading of goods or services between two related companies, and both companies can succeed. Transfer pricing improves business efficiency and simplifies accounting processes. Valuable human hours can be saved with reasonable optimization and accounting, leading to greater profitability and focus on business strategies. Transfer costs include packing, shipping and insurance, plus applicable customs fees.

The transfer pricing agreement may be between a parent company or a subsidiary or between two subsidiaries. Take, for example, the North American company that makes tires for trucks and buses. The company owns a wholly owned subsidiary, Rubber Plantation, in South America. The transfer pricing guarantees the parent company a constant supply of the raw material it needs to produce its product, while the subsidiary is assured of a stable rubber market.

Usually, the price is negotiable, which is close to the general market price. Given that the transfer price is relative to the sister company, it would not make sense for some to sell at a higher market price and buy another under market prices. This will lead to decreased productivity of some people while enhancing others' low levels.

The cable manufacturer may be a wholly owned subsidiary of the automaker, but may still sell its bundles to competing car makers for the same price. This is known as the pricing policy whereby the parent company applies the same price to its subsidiaries and subsidiaries as external parties or suppliers.

Prices for remittance and savings generally.

In a lower world, legal price changes allow companies to avoid income taxes when sales in one country turn into profits in another. This is especially true for multinational drug companies like Pfizer and Eli Lilly. The tax problem behind transfer pricing is more complicated because different countries have different tax structures.

Less than a decade ago, Bloomberg estimated that American companies were avoiding paying $ 1 billion in foreign exchange taxes because of the transfer fee. The valuation was stopped by a former Treasury tax economist who claimed a change in profitability as a result of the transfer price.

Transfer pricing can be considered as an option for large companies with national or global operations. The parent company may be able to purchase goods from one of its subsidiaries for redistribution to other subsidiaries and not for direct use. Given the cost of distribution, it may be more beneficial for some subsidiaries to supply the same goods locally or at least closer to their business base.