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In respect of international business, a project is called a turnkey project because
Answer & Solution
Answer: Option
B
Solution:
To answer this question, first understand the meaning of a turnkey project in international business.
A turnkey project is a contract in which one company (the licensor or contractor) agrees to design, build, install, test, and make a project fully operational for another company (the licensee or client).
After completing all the work and ensuring that the plant is functioning properly, the licensor hands over the entire operational project to the client. The client can immediately start using the facility, just as if they only had to "turn the key" to begin operations.
This is why such projects are known as turnkey projects.
Now let's examine the options:
Option A: Incorrect. The licensee does not construct the plant. In a turnkey project, the construction and setup are carried out by the licensor or contractor.
Option B: Correct. The licensor completes the project, starts the operations, and then hands over the ready-to-use plant to the licensee.
Option C: Incorrect. In a turnkey project, the licensor does not leave part of the work unfinished for the licensee. The project is handed over only after completion.
Option D: Incorrect. This option describes a joint venture, where two parties jointly undertake a business activity and share profits and risks. A turnkey project does not involve profit-sharing between the licensor and licensee after handover.
Exam Tip: Whenever you see the term "turnkey project", remember the phrase "ready-to-use project handed over to the client". The client simply takes charge of the completed facility and starts operations.
Therefore, Option B is the correct answer.
A turnkey project is a contract in which one company (the licensor or contractor) agrees to design, build, install, test, and make a project fully operational for another company (the licensee or client).
After completing all the work and ensuring that the plant is functioning properly, the licensor hands over the entire operational project to the client. The client can immediately start using the facility, just as if they only had to "turn the key" to begin operations.
This is why such projects are known as turnkey projects.
Now let's examine the options:
Option A: Incorrect. The licensee does not construct the plant. In a turnkey project, the construction and setup are carried out by the licensor or contractor.
Option B: Correct. The licensor completes the project, starts the operations, and then hands over the ready-to-use plant to the licensee.
Option C: Incorrect. In a turnkey project, the licensor does not leave part of the work unfinished for the licensee. The project is handed over only after completion.
Option D: Incorrect. This option describes a joint venture, where two parties jointly undertake a business activity and share profits and risks. A turnkey project does not involve profit-sharing between the licensor and licensee after handover.
Exam Tip: Whenever you see the term "turnkey project", remember the phrase "ready-to-use project handed over to the client". The client simply takes charge of the completed facility and starts operations.
Therefore, Option B is the correct answer.