Question

Which of the following statements is most correct regarding transaction exposure and translation exposure? 1.Neither exposure...

Which of the following statements is most correct regarding transaction exposure and translation exposure?

1.Neither exposure involves real cash flows.

2.Transaction exposure involves real cash flows.

3.Translation exposure involves real cash flows.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

2.Transaction exposure involves real cash flows.

Transaction exposure is related to the contractual cash-flows exposure, generally receivables or payables, whose values are subject to changes in the exchange rate due to the contract being denominated in a foreign currency. Due to this, transaction exposure involves real cash-flows

Translation exposure is the risk associated with extent to which company's financial statements is affected by exchange rate movements. Unlike transaction exposure, translation exposure has no direct effect on the cash-flows and have a realizable effect only during the sale or liquidation of the element involved in the financial statement.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which following statement is correct? I. Transaction exposure and operating exposure exist because of expected changes...
Which following statement is correct? I. Transaction exposure and operating exposure exist because of expected changes in future cash flows. II. Accounting exposure, also called translation exposure, is the potential for accounting-derived changes in owner’s equity to occur because of the need to “translate” foreign currency financial statements of foreign subsidiaries into a single reporting currency to prepare worldwide consolidated financial statements. III. The difference between transaction exposure and operating exposure is that operating exposure is concerned with future cash...
Briefly describe the following items: 1.Transaction exposure, economic exposure and translation exposure. Which exposure is more...
Briefly describe the following items: 1.Transaction exposure, economic exposure and translation exposure. Which exposure is more relevant to multinational corporation? Please explain 2.Purchasing power parity and Interest rate parity, and their linkage.
6. Identify whether the following create substantial transaction, operating, and/or translation exposure (or no exposure at...
6. Identify whether the following create substantial transaction, operating, and/or translation exposure (or no exposure at all) for a U.S. company, and how the company will be affected if the foreign currency depreciates. The examples will typically create more than one type of exposure. d) Widgets International (WI) purchases a British factory, financed by issuing dollar debt and swapping for pound-denominated debt. WI is expecting a steady stream of pound revenues from the factory, FASB 52 is in effect.
Which statements are correct regarding the accounting treatment prescribed by IFRS 17 Insurance Contracts? 1. An...
Which statements are correct regarding the accounting treatment prescribed by IFRS 17 Insurance Contracts? 1. An insurance contract is recognised as a liability by the insurer . 2. If the present value of fulfilment cash flows arising in an insurance contract is negative, a loss is recognised over the period to which the contract relates. 3. A finance expense is recognised in relation to insurance contracts 1 only 1 and 2 2 and 3 1 and 3 only
Which of the following statements is/are correct? 1. The principal but not the interest to be...
Which of the following statements is/are correct? 1. The principal but not the interest to be paid this year on a 30-year mortgage is properly       classified on the Statement of Financial Position as a current liability. 2. A CD with a maturity of 9-months is classified as an investment asset on the Statement of       Financial Position. Select one: a. a.   1 only. b. b.   2 only. c. c.   Both 1 and 2. d. d. Neither 1 nor 2....
Which statements regarding translation are correct? (There may be more than one answer). EF-Tu moves the...
Which statements regarding translation are correct? (There may be more than one answer). EF-Tu moves the mRNA by one codon EF-G delivers aa-tRNAs to the ribosome Translation initiation occurs by 70S riboosomes binding to mRNAs with fMet-tRNA Translocation refers to the chemical step of peptide bond formation RRF functions to cleave off the peptide chain from the P-site tRNA IF3 is released after the 30S subunit binds mRNA and the fMet-tRNA sits in the P-site; this allows the 50S subunit...
Which of these statements is not true regarding operating exposure: Select one: a. The degree of...
Which of these statements is not true regarding operating exposure: Select one: a. The degree of operating exposure will likely be much greater for a firm involved in international business than for a purely domestic firm. b. The impact of a change in the local currency on inflow and outflow variables can sometimes be indirect and therefore different from what is expected. c. All of these statements are true. d. Generally, depreciation of the firm's local currency causes a decrease...
Which of the following statements about capital budgeting cash flow estimation is most correct? A Interest...
Which of the following statements about capital budgeting cash flow estimation is most correct? A Interest expense on any loans used to acquire the equipment must be included in the project’s cash flows. B Money spent last year on a consulting report must be included in the project’s cash flows. C Opportunity costs associated with land usage must be included in the project’s cash flows. D Any impact on the cash flows of existing (current) projects must be included in...
1. Which of the following statements is correct? a. A project with conventional cash flows is...
1. Which of the following statements is correct? a. A project with conventional cash flows is one with an initial cash outflow followed by one or more cash inflows. b. The NPV method determines how much the future value of cash inflows exceeds the present value of costs. c. All the answers are correct. d. When two projects are independent, accepting one project implicitly eliminates the other. e. Conventional cash flow patterns could lead to conflicting decisions by NPV and...
Which of the following statements regarding cash flow is correct? Multiple Choice Cash flow measures changes...
Which of the following statements regarding cash flow is correct? Multiple Choice Cash flow measures changes in the firm's cash account. After-tax cash flow is usually identical to accounting profits when accrual accounting is used for financial statement purposes. In evaluating capital budgeting decisions, cash flows should be valued on a pre-tax basis for consistency's sake. Incremental cash flows should include opportunity costs but ignore sunk costs. Cash flow should be recognized only when it has accrued according to GAAP...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT