Chapter 10

682 Words Jun 25th, 2015 3 Pages
Fundamentals of Multinational Finance, 5e (Moffett et al.)
Chapter 10 Translation Exposure

Multiple Choice and True/False Questions

10.1 Overview of Translation

1) Translation exposure may also be called ________ exposure.
A) transaction
B) operating
C) accounting
D) currency
Answer: C
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition

3) ________ 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.
A) Transaction
B) Operating
C) Currency
D) Translation
Answer: D
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition

4) Translation exposure measures
A) changes in the value of
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A) fixed asses and current assets; income and expense items
B) equity accounts and fixed assets; current assets and liabilities
C) current assets and liabilities; equity accounts and fixed assets
D) equity accounts and current liabilities; current assets and fixed assets
Answer: B
Diff: 1
Topic: 10.2 Translation Methods
Skill: Conceptual

10.3 Trident Corporation 's Translation Exposure

1) A Canadian subsidiary of a U.S. parent firm is instructed to bill an export to the parent in U.S. dollars. The Canadian subsidiary records the accounts receivable in Canadian dollars and notes a profit on the sale of goods. Later, when the U.S. parent pays the subsidiary the contracted U.S. dollar amount, the Canadian dollar has appreciated 10% against the U.S. dollar. In this example, the Canadian subsidiary will record a
A) 10% foreign exchange loss on the U.S. dollar accounts receivable.
B) 10% foreign exchange gain on the U.S. dollar accounts receivable.
C) since the Canadian firm is a U.S. subsidiary neither a gain nor loss will be recorded.
D) any gain or loss will be recorded only by the parent firm.
Answer: A
Diff: 1
Topic: 10.3 Trident Corporation 's Translation Exposure
Skill: Conceptual

2) ________ gains and losses are "realized" whereas ________ gains and losses are only "paper."
A) Translation; transaction
B) Transaction; translation
C) Translation; operating
D) None of the above
Answer: B

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