Question 1

The "reporting currency" is:

Accepted Answer

A)  the currency of the primary economic environment in which the entity operates. 
B)  the currency in which the MNC prepares its consolidated financial statements. 
C)  a currency that is not the parent firm's home country currency. 
D)  None of these. 
A)  the currency of the primary economic environment in which the entity operates. 
B)  the currency in which the MNC prepares its consolidated financial statements. 
C)  a currency that is not the parent firm's home country currency. 
D)  None of these.

Question 2

Translation exposure refers to:

Accepted Answer

A)  accounting exposure. 
B)  the effect that an unanticipated change in exchange rates will have on the consolidated financial reports of an MNC. 
C)  the change in the value of a foreign subsidiaries assets and liabilities denominated in a foreign currency, as a result of exchange rate change fluctuations, when viewed from the perspective of the parent firm. 
D)  All of these. 
A)  accounting exposure. 
B)  the effect that an unanticipated change in exchange rates will have on the consolidated financial reports of an MNC. 
C)  the change in the value of a foreign subsidiaries assets and liabilities denominated in a foreign currency, as a result of exchange rate change fluctuations, when viewed from the perspective of the parent firm. 
D)  All of these.

Question 3

The "functional currency" is:

Accepted Answer

A)  the currency of the primary economic environment in which the entity operates. 
B)  the currency in which the MNC prepares its consolidated financial statements. 
C)  a currency that is not the parent firm's home country currency. 
D)  None of these. 
A)  the currency of the primary economic environment in which the entity operates. 
B)  the currency in which the MNC prepares its consolidated financial statements. 
C)  a currency that is not the parent firm's home country currency. 
D)  None of these.

Question 4

The Canadian methods for consolidating the financial reports of an MNC are:

Accepted Answer

A)  short/long term method and current/future method. 
B)  current/non-current method and short/long term method. 
C)  temporal method and current rate method. 
D)  temporal method and economic/non-economic method. 
A)  short/long term method and current/future method. 
B)  current/non-current method and short/long term method. 
C)  temporal method and current rate method. 
D)  temporal method and economic/non-economic method.

Question 5

XYZ Corporation,a Canadian parent firm,has a wholly owned sales affiliate,ABC Ltd.,in the United Kingdom.The affiliate was established to service to the local market. Assume that:
1)the functional currency of ABC is the pound
2)the reporting currency is the dollar
3)the initial exchange rate $1.00 = £ 0.67
ABC's nonconsolidated balance sheets and the footnotes to the financial statements indicate that ABC owes the parent firm £200,000.Assume that,XYZ had made an investment of $300,000 in the affiliate.Under CICA 1650,the intercompany debt and investment will appear on the consolidated balance sheet as:

Accepted Answer

A)  £200,000. 
B)  $201,493. 
C)  $298,507. 
D)  None of these. 
A)  £200,000. 
B)  $201,493. 
C)  $298,507. 
D)  None of these.

Question 6

The French subsidiary of a Canadian parent has the following balance sheet (in euros):
 $$\begin{array} { l r l r } 
\text { Cash } & \text { EUR 200,000 } & \begin{array} { l } 
\text { Current } \
\text { liabilities }
\end{array} & \text { EUR400,000 } \
\text { Receivables } & 300,000 & \text { Long-term debt } & 100,000 \
\text { Inventory } & 400,000 & & \
\text { Net plant \& } & \underline { 500,000 } & \text { Owner's equity } & \underline { 900,000 } \
\text { equipment } & \text { EUR1,400,000 } && \text { EUR1,400,000 }
\end{array}$$ The euro increases in value from EUR 1.6/C$ to EUR 1.3/C$.Using the current rate method,what happened to the total value of assets?

Accepted Answer

The total value of a

Question 7

A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation is called a/an:

Accepted Answer

A)  interdependent foreign operation. 
B)  integrated foreign operation. 
C)  independent foreign operation. 
D)  self-sustaining foreign operation. 
A)  interdependent foreign operation. 
B)  integrated foreign operation. 
C)  independent foreign operation. 
D)  self-sustaining foreign operation.

Question 8

The net effect of an increase in the exchange rate on translation exposure depends on:

Accepted Answer

A)  the translation method used. 
B)  whether the value of assets exceeds the value of liabilities. 
C)  whether the value of liabilities exceeds the value of assets. 
D)  All of these. 
A)  the translation method used. 
B)  whether the value of assets exceeds the value of liabilities. 
C)  whether the value of liabilities exceeds the value of assets. 
D)  All of these.

The "reporting currency" is:

Translation exposure refers to:

The "functional currency" is:

The Canadian methods for consolidating the financial reports of an MNC are:

A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation is called a/an:

The net effect of an increase in the exchange rate on translation exposure depends on:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters

Exam 14: Management of Translation Exposure

The "reporting currency" is:

Translation exposure refers to:

The "functional currency" is:

The Canadian methods for consolidating the financial reports of an MNC are:

A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation is called a/an:

The net effect of an increase in the exchange rate on translation exposure depends on:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters