Final answer:
Payment of dividends is a common method for firms to transfer funds from foreign subsidiaries to the parent company. This is done by distributing a portion of the profits to the stock owners. Other methods of transferring funds include reinvesting the profits, repatriating the profits through intercompany loans, or using the profits to finance subsidiary operations.
Step-by-step explanation:
Payment of dividends is a common method for firms to transfer funds from foreign subsidiaries to the parent company. When a company pays a dividend, it distributes a portion of its profits to its stock owners. This transfer of funds is often done in the form of cash or additional shares of stock.
For example, if a company has a subsidiary in a foreign country and that subsidiary generates profits, the parent company may decide to pay a dividend to the stock owners. This can be done by transferring the funds from the subsidiary to the parent company, which can then distribute the dividend to the stock owners.
It's important to note that payment of dividends is just one method by which firms transfer funds from foreign subsidiaries. Other methods include reinvesting the profits in the subsidiary, repatriating the profits through intercompany loans, or using the profits to finance the operations of the subsidiary.