GE is commissioned to build a new power station for which the overall construction effort is contracted through GE Power Systems.But in addition to generators, GE may need other items such as switching technology or light fixtures that are manufactured by its subsidiary.GE Power Systems would purchase items it doesn't manufacture internally from GE Automation, another subsidiary of GE and then sell them on to the customer as part of the construction project.The above serves as an example of:
A)debt financing.
B)capital budgeting.
C)equity financing.
D)transfer pricing.
E)multilateral netting.

Question

Quizplus · Accepted Answer

The scenario describes a situation where different divisions or subsidiaries within the same parent company (GE) transact with each other, which is an example of transfer pricing. Transfer pricing refers to the prices at which services, goods, and intellectual property are traded across borders between related entities within the same multinational enterprise.

GE Is Commissioned to Build a New Power Station for Which