Test bank chapter 1 Introduction
Chapter 10 Translation Exposure Management
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Translation Exposure Management 1. Translation exposure means that . A. a firm incurs actual losses in foreign exchange markets B. currency conversion takes place in foreign exchange market C. a firm makes actual profits in foreign exchange markets D. a firm covers its foreign exchange risk in the forward markets * E. a firm experiences an accounting impact of exchange rate changes 2. Net translation exposure means . A. the difference between exposed operating expenses and fixed assets B. the difference between exposed assets and accounts receivable * C. the difference between exposed assets and exposed liabilities D. the difference between exposed revenues and exposed expenses E. none of the above 3. The current/non-current method of currency translation will not affect . A. cash
B. accounts receivable C. accounts payable D. notes payable * E. long-term debt 4. The monetary/non-monetary method of currency translation will not affect . A. cash
B. accounts receivable * C. inventory D. marketable securities E. accounts payable 5. The temporal method of currency translation is almost similar to the monetary/non-monetary method except the following item . A. accounts receivables at historical cost B. accounts receivables at market price C. inventory at historical cost * D. inventory at market price E. fixed assets at market price 6. FASB No. 8 is the same as the following translation method . A. current/non-current method B. monetary/non-monetary method * C. temporal method D. current rate method E. exchange rate method 7. FASB No. 52 shows exchange gains or losses in the following . A. quarterly income statement * C. stockholders' equity account D. the sources and uses of funds statement E. none of the above 8. The functional currency is defined as the currency of the environment in which the entity primarily generates and expends cash, and usually refers to the currency. A. parent * B. local C. reporting D. recording E. home
A. those foreign operations whose cash flows directly affect the parent’s US dollar cash flows B. foreign entities that are merely an extension of the parent company C. foreign subsidiaries in countries with runaway inflation D. foreign subsidiaries in countries with inflation of 100% over three years * E. all of the above
* A. decrease soft-currency assets, increase soft-currency liabilities B. increase soft-currency assets, increase soft-currency liabilities C. decrease hard-currency assets, decrease soft-currency liabilities D. decrease hard-currency assets, increase hard-currency liabilities E. none of the above 11. The following statement does not apply to transfer prices _____. A. they are prices of goods and services sold between related parties B. they are prices of goods and services sold between parents and subsidiaries C. they are usually the subject of government policing mechanisms * D. they cannot be manipulated by importers E. they are frequently different from arm’s length prices 12. Translation exposure ___. A. is sometimes called accounting exposure B. measures the affect of an exchange rate change on published financial statement of a firm C. refers to the potential change in the value of outstanding obligations due to changes in the exchange rate between the inception of a contract and the settlement of the contract * D. A and B E. A and C 13. Translation exposure affects a company’s ___. A. ability to raise capital B. earnings per share C. stock price D. key financial ratios * E. all of the above 14. Translation exposure ___. A. measures the affect of an exchange rate change on published financial statement of a firm B. does not involve actual cash flows C. does not present any financial risk to a firm * D. A and B E. all of the above 15. Which of the following items is not related to a balance sheet hedge in translation exposure management? A. reduce the levels of local currency B. tighten credit C. delay the collection of hard currency receivables D. increase hard-currency assets * E. options market hedge Use the following information to answer the next three questions: ABC Company's Canadian subsidiary has the following balance sheet. Cash and receivables C$ 800 Payables C$ 900 Inventory 900 Long-Term Debt 500 Fixed assets 700 Net Worth 1,000 Total assets C$2,400 Total claims C$2,400 Suppose the Canadian dollar depreciates from US$1.00 to US$.80 during the period. 16. Under the monetary/non-monetary method, what is ABC's translation gain or loss? * A. + $120 B. - $120 C. + $200 D. - $200 E. + $900 Download 435.5 Kb. Share with your friends:
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