Joint ventures involve the merging of two or more companies. ( ) a) True () b) False A country experiences a trade surplus when the total value of exports is higher than the total value of imports. () a) True () b) False
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- The foreign subsidiary of a U.S. firm is profitable when profits are measured in the foreign currency but those profits become losses when measured in U.S. dollars. This is an example of which one of the following? A. Interest rate disparities B. Short-run exposure to exchange rate risk C. Long-run exposure to exchange rate risk D. Political risk associated with the foreign operations E. Translation exposure to exchange rate riskWhich of the following is correct when exports exceed imports in international trade? Multiple Choice O O A. The current account will have a surplus. B. The financial account will have a surplus. C. The current account will have a deficit. D. Both B and CWhich of the following situation is NOT the case that a domestic company is exposed to foreign currency exchange risk? a. A firm commitment to enter into a foreign currency transaction. b. A forecasted foreign currency transaction that has a high probability of occurrence. c. An investment in a domestic subsidiary. d. An actual existing foreign currency transaction that results in recognition of assets or liabilities.
- Transaction exposure gives rise to foreign exchange gains and losses that are ultimately realized in cash True False Hedging does not protect companies from exchange rate fluctuations True False Assets and liabilities translated at the historical exchange rate are not exposed to a translation adjustment True False Spot rate is the today's (current) price for purchasing or selling a foreign currency True False Foreign currency option a right to buy or sell foreign currency True FalseAs used in international accounting, a “hedge” is: A)a business transaction made to reduce the exposure of foreign exchange risk. B)the legal barrier between the various divisions of a multinational company. C)the loss in US$ resulting from a decline in the value of the US$ relative to foreign currencies. D)one form of foreign direct investment.Give typing answer with explanation and conclusion Which of the following is an example of foreign exchange risk for an MNC? a. Foreign subsidiary of the MNC may face higher tarriffs b. Foreign subsidiary of the MNC may have to pay higher taxes c. Foreign subsidiary of the MNC may make less sales due to weak foreign currency d. Foreign subsidiary of the MNC may make less sales due to lower consumer income
- 14. Which of the following combinations correctly describes the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses? Type of Transaction Foreign Currency Foreign Exchange Gain /Loss A. Export sale Appreciates Loss B. Import purchase Appreciates Gain C. Import purchase Depreciates Gain D. Export sale Depreciates Gaiurgent no cahtgpt answer. What is the principal function of the foreign exchange market? A. To transfer purchasing power from one nation to another in exchange for currency B. To maintain fixed exchange rates that remain unaffected by market forces C. To facilitate foreign direct investment D. None of the aboveAn investor in the common stock of companies in a foreign country may wish to hedge against the _____ of the investor’s home currency and can do so by _____ the foreign currency in the forward market.a. depreciation; selling.b. appreciation; purchasing.c. appreciation; selling.d. depreciation; purchasing.
- 6 - Which is not from the benefits of foreign trade?A) Increase in foreign currency revenuesB) Expansion of market shareC) Opening to foreign competitionD) Gaining the brand imageE) Saving resourcesAssume that a U.S. company has a foreign subsidiary whose functional currency is the U.S. dollar. Explain how exchange rates between the foreign currency and the dollar would have to change in order to result in a current-year remeasurement loss and how the company could use a foreign currency loan receivable or payable to hedge against its net investment in the foreign subsidiary.A U.S. firm will be ________ by dollar _______ if its expenses are more susceptible to exchange rate movements than its revenue. A. unaffected; weakens B. benefited; strengthens C. benefited; weakens D. unaffected; strengthens