Multiple choice

Which of the following come under the definition of Foreign Direct Investment?

  1. Mergers and acquisitions
  2. Portfolio investment
  3. Building new facilities
  4. Transfer of technology

  1. Only 1and 3

  2. Only 1, 2 and 3

  3. Only 1, 3 and 4

  4. All of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Foreign direct investment (FDI) is a direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds. Foreign direct investment has many forms. Broadly, foreign direct investment includes mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra-company loans. FDI usually involves participation in management, joint-venture, transfer of technology and expertise.

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