Question #73
Reading: Reading 10 Multinational Operations
PDF File: Reading 10 Multinational Operations.pdf
Page: 41
Status: Unattempted
Question
Sopgate is a manufacturer of branded fast moving consumer goods having business operations in 28 countries (in each country, Sopgate has a wholly owned local subsidiary for production and/or distribution). Following information is available from Sopgate's annual report: Region Revenue Growth (USD)* Growth in pre-tax profits (USD)* Tax rate Latin America 5% 4% 25% North America 3% 3% 35% Europe 2% −1% 45% Asia pacific 4% 6% 20% *Growth rate indicates expected growth rate over the next five years. Sopgate's effective tax rate is most likely expected to:
Answer Choices:
A. increase
B. remain unchanged
C. decrease
Explanation
Sopgate's profits are expected to grow at a faster rate for lower tax rate regions as
compared to higher tax regions. Hence the effective tax rate can be expected to decrease.