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Fundamentals of Multinational Finance, 4e (Moffett) Chapter 10 Transaction and Translation Exposure Multiple Choice and True/False Questions The stages in the life of a transaction exposure can be broken into three distinct time periods. The first time period is the time between quoting a price and reaching an actual sale agreement or contract. The next time period is the time lag between taking an order and actually filling or delivering it. Finally, the time it takes to get paid after delivering the product. In order, these stages of transaction exposure may be identified as, Answer backlog, quotation, and billing exposure. billing, backlog, and quotation exposure. quotation, backlog, and billing exposure. quotation, billing, and backlog exposure. 10.1 Types of Foreign Exchange Exposure 1) ________ exposure deals with cash flows that result from existing contractual obligations. A) Operating B) Transaction C) Translation D) Economic Answer: B Diff: 1 Topic: 10.1 Types of Foreign Exchange Exposure Skill: Recognition 2) ________ exposure measures the change in the present value of the firm resulting from unexpected changes in exchange rates. A) Operating B) Transaction C) Translation D) Accounting Answer: A Diff: 1 Topic: 10.1 Types of Foreign Exchange Exposure Skill: Recognition 3) Each of the following is another name for operating exposure EXCEPT ________. A) economic exposure B) strategic exposure C) accounting exposure D) competitive exposure Answer: C Diff: 1 Topic: 10.1 Types of Foreign Exchange Exposure Skill: Recognition 1 Copyright 2012 Pearson Education, Inc. 4) Transaction exposure and operating exposure exist because of unexpected changes in future cash flows. The difference between the two is that ________ exposure deals with cash flows already contracted for, while ________ exposure deals with future cash flows that might change because of changes in exchange rates. A) transaction; operating B) operating; transaction C) operating; accounting D) none of the above Answer: A Diff: 1 Topic: 10.1 Types of Foreign Exchange Exposure Skill: Recognition 5) ________ exposure is the potential for accounting-derived changes in owner's equity to occur because of the need to translate foreign currency financial statements into a single reporting currency. A) Transaction B) Operating C) Economic D) Accounting Answer: D Diff: 1 Topic: 10.1 Types of Foreign Exchange Exposure Skill: Recognition 6) Losses from ________ exposure generally reduce taxable income in the year they are realized. ________ exposure losses may reduce taxes over a series of years. A) accounting; Operating B) operating; Transaction C) transaction; Operating D) transaction; Accounting Answer: C Diff: 1 Topic: 10.1 Types of Foreign Exchange Exposure Skill: Recognition 7) Losses from ________ exposure generally reduce taxable income in the year they are realized. ... View Full Document

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