An MNC has the ability to adjust intracompany fund flows and profits on a global basis. This ability is one of the most important advantages that MNCs enjoy. Financial transactions within an MNC stem from the internal transfer of goods, services, technology, and capital. Such intracompany flows range from finished goods to intangible items such as management skills, trademarks, and patents. Furthermore, capital investments and direct loans give rise to future flows of dividends, interest, and principal payments. On the other hand, many of the gains achieved through intracompany fund flows derive from some questionable business practices. For example, the amount of gains could depend on a company's ability to take advantage of soft spots in tax laws and regulatory barriers. Consequently, conflicts between MNCs and their host governments are quite likely.
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