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ACCA Strategic Professional · Advanced Financial Management · The role and responsibility of senior financial executive/advisor

A senior finance adviser is assessing the macroeconomic environment before approving an overseas investment. Which factor is most relevant to the risk that profits cannot be remitted to the parent?

Exchange controls and other government restrictions on capital movements create blocked-funds risk, limiting the ability to repatriate profits to the parent. The adviser should assess this policy environment before investing, since profitability alone does not guarantee cash can be remitted.

  1. AExchange controls and government restrictions on capital movementsCorrect
  2. BThe company's own dividend cover
  3. CThe parent's credit rating only
  4. DThe level of domestic competition

Explanation

Blocked funds risk arises from government policy such as exchange controls limiting repatriation of profits. Other factors affect profitability or financing but not the legal ability to remit.

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