Question 1

Translation exposure may also be called ________ exposure.

Accepted Answer

A)  transaction 
B)  operating 
C)  accounting 
D)  currency 
A)  transaction 
B)  operating 
C)  accounting 
D)  currency

Question 2

If the European subsidiary of a U.S.firm has net exposed assets of €750,000,and the euro drops in value from $1.30/euro to $1.20/€ the U.S.firm has a translation:

Accepted Answer

A)  gain of $75,000. 
B)  loss of $75,000. 
C)  gain of $625,000. 
D)  loss of €576,923. 
A)  gain of $75,000. 
B)  loss of $75,000. 
C)  gain of $625,000. 
D)  loss of €576,923.

Question 3

Translation gains or losses can be quite different from operating gains or losses not only in magnitude but also in sign.

Accepted Answer

A) True 
 B)False

Question 4

Gains or losses caused by translation adjustments when using the current rate method are reported separately on the:

Accepted Answer

A)  consolidated statement of cash flow. 
B)  consolidated income statement. 
C)  consolidated balance sheet. 
D)  none of the above 
A)  consolidated statement of cash flow. 
B)  consolidated income statement. 
C)  consolidated balance sheet. 
D)  none of the above

Question 5

The main technique to minimize translation exposure is called a/an ________ hedge.

Accepted Answer

A)  balance sheet 
B)  income statement 
C)  forward 
D)  translation 
A)  balance sheet 
B)  income statement 
C)  forward 
D)  translation

Question 6

Under the temporal rate method,specific assets and liabilities are translated at exchange rates consistent with the timing of the item's creation.

Accepted Answer

A) True 
 B)False

Question 7

A foreign subsidiary's functional currency is the currency of the primary economic environment in which the subsidiary operates and in which it generates cash flows.

Accepted Answer

A) True 
 B)False

Question 8

The two methods for the translation of foreign subsidiary financial statements are the current rate and temporal methods.Briefly,describe how each of these methods translates the foreign subsidiary financial statements into the parent company's consolidated statements.Identify when each technique should be used and the major advantage(s)of each.

Accepted Answer

The current rate method translates almos

Question 9

: The current rate method and the temporal method are two basic methods for translation that are employed worldwide

Accepted Answer

A) True 
 B)False

Question 10

________ exposure is the potential for an increase or decrease in the parent company's net worth and reported net income caused by a change in exchange rates since the last transaction.

Accepted Answer

A)  Transaction 
B)  Operating 
C)  Currency 
D)  Translation 
A)  Transaction 
B)  Operating 
C)  Currency 
D)  Translation

Question 11

If the financial statements of the foreign subsidiary are maintained in the local currency and the U.S.dollar is the functional currency,they are remeasured by the temporal method.

Accepted Answer

A) True 
 B)False

Question 12

The two basic methods for the translation of foreign subsidiary financial statements are the ________ method and the ________ method.

Accepted Answer

A)  current rate; temporal 
B)  temporal; proper timing 
C)  current rate; future rate 
D)  none of the above 
A)  current rate; temporal 
B)  temporal; proper timing 
C)  current rate; future rate 
D)  none of the above

Question 13

If management anticipates an appreciation of the foreign currency,it should decrease net exposed assets to benefit from a gain.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following primary principles of U.S.translation procedures in NOT true?

Accepted Answer

A)  If the financial statements of the foreign subsidiary of a U.S. company are maintained in U.S. dollars, translation is not required. 
B)  If the financial statements of the foreign subsidiary are maintained in the local currency and the local currency is the functional currency, they are translated by the temporal method. 
C)  If the financial statements of the foreign subsidiary are maintained in the local currency and the U.S. dollar is the functional currency, they are remeasured by the temporal method. 
D)  All of the above are true. 
A)  If the financial statements of the foreign subsidiary of a U.S. company are maintained in U.S. dollars, translation is not required. 
B)  If the financial statements of the foreign subsidiary are maintained in the local currency and the local currency is the functional currency, they are translated by the temporal method. 
C)  If the financial statements of the foreign subsidiary are maintained in the local currency and the U.S. dollar is the functional currency, they are remeasured by the temporal method. 
D)  All of the above are true.

Translation exposure may also be called ________ exposure.

If the European subsidiary of a U.S.firm has net exposed assets of €750,000,and the euro drops in value from $1.30/euro to $1.20/€ the U.S.firm has a translation:

Translation gains or losses can be quite different from operating gains or losses not only in magnitude but also in sign.

Gains or losses caused by translation adjustments when using the current rate method are reported separately on the:

The main technique to minimize translation exposure is called a/an ________ hedge.

Under the temporal rate method,specific assets and liabilities are translated at exchange rates consistent with the timing of the item's creation.

A foreign subsidiary's functional currency is the currency of the primary economic environment in which the subsidiary operates and in which it generates cash flows.

: The current rate method and the temporal method are two basic methods for translation that are employed worldwide

________ exposure is the potential for an increase or decrease in the parent company's net worth and reported net income caused by a change in exchange rates since the last transaction.

If the financial statements of the foreign subsidiary are maintained in the local currency and the U.S.dollar is the functional currency,they are remeasured by the temporal method.

The two basic methods for the translation of foreign subsidiary financial statements are the method and the method.

If management anticipates an appreciation of the foreign currency,it should decrease net exposed assets to benefit from a gain.

Which of the following primary principles of U.S.translation procedures in NOT true?

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 11: Translation Exposure

Translation exposure may also be called ________ exposure.

If the European subsidiary of a U.S.firm has net exposed assets of €750,000,and the euro drops in value from $1.30/euro to $1.20/€ the U.S.firm has a translation:

Translation gains or losses can be quite different from operating gains or losses not only in magnitude but also in sign.

Gains or losses caused by translation adjustments when using the current rate method are reported separately on the:

The main technique to minimize translation exposure is called a/an ________ hedge.

Under the temporal rate method,specific assets and liabilities are translated at exchange rates consistent with the timing of the item's creation.

A foreign subsidiary's functional currency is the currency of the primary economic environment in which the subsidiary operates and in which it generates cash flows.

: The current rate method and the temporal method are two basic methods for translation that are employed worldwide

________ exposure is the potential for an increase or decrease in the parent company's net worth and reported net income caused by a change in exchange rates since the last transaction.

If the financial statements of the foreign subsidiary are maintained in the local currency and the U.S.dollar is the functional currency,they are remeasured by the temporal method.

The two basic methods for the translation of foreign subsidiary financial statements are the ________ method and the ________ method.

If management anticipates an appreciation of the foreign currency,it should decrease net exposed assets to benefit from a gain.

Which of the following primary principles of U.S.translation procedures in NOT true?

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

The two basic methods for the translation of foreign subsidiary financial statements are the method and the method.