Chapter 10
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 outstanding financial obligations incurred prior to a change in exchange rates.
B) 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 consolidation of international operations.
C) an unexpected change in exchange rates impact on short run expected cash flows.
D) none of the above.
Answer: B
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition
10.2 Translation Methods
5) The basic advantage of the ________ method of foreign currency translation is that foreign nonmonetary assets are carried at their original cost in the parent 's consolidated statement while the most important advantage of the ________ method is that the gain or loss from translation does not pass through the income statement.
A) monetary; current rate
B) temporal; current rate
C) temporal; monetary
D) current rate; temporal
Answer: D
Diff: 1
Topic: 10.2 Translation Methods
Skill: Conceptual
8) The two basic methods for the translation of foreign subsidiary financial statements are the ________ method and the ________ method.
A) current rate; temporal
B) temporal; proper timing
C) current rate; future rate
D) none of the above
Answer: A
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 outstanding financial obligations incurred prior to a change in exchange rates.
B) 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 consolidation of international operations.
C) an unexpected change in exchange rates impact on short run expected cash flows.
D) none of the above.
Answer: B
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition
10.2 Translation Methods
5) The basic advantage of the ________ method of foreign currency translation is that foreign nonmonetary assets are carried at their original cost in the parent 's consolidated statement while the most important advantage of the ________ method is that the gain or loss from translation does not pass through the income statement.
A) monetary; current rate
B) temporal; current rate
C) temporal; monetary
D) current rate; temporal
Answer: D
Diff: 1
Topic: 10.2 Translation Methods
Skill: Conceptual
8) The two basic methods for the translation of foreign subsidiary financial statements are the ________ method and the ________ method.
A) current rate; temporal
B) temporal; proper timing
C) current rate; future rate
D) none of the above
Answer: A