Multiple Choice Questions
1. Which of the following groups is a supranational organization?
A) United Nations
B) Organization for Economic Cooperation and Development
C) International Federation of Accountants
D) All of the above
Answer: D Level: Easy LO: 1
2. Determination of net present value involves:
A) forecasting future profits and cash flows.
B) discounting future cash flows back to their present value.
C) analysis on an after-tax basis.
D) All of the above
Answer: D Level: Medium LO: 1
3. International accounting can be defined in terms of which the following levels?
A) Supranational organizations
B) Company
C) Country
D) All of the above
Answer: D Level: Easy LO: 1
,4. The factor used to convert from one country's currency to another country's
currency is called the:
A) Interest rate.
B) Cost of capital.
C) Exchange rate.
D) Strike price.
Answer: C Level: Easy LO: 2
5. What is the term used to describe the possibility that a foreign currency will
decrease in US$ value over the life of an asset such as Accounts Receivable?
A) foreign exchange translation
B) foreign exchange risk
C) hedging
D) foreign currency options
Answer: B Level: Medium LO: 2
,6. Foreign exchange risk arises when:
A) business transactions are denominated in foreign currencies.
B) sales are made to customers in a foreign country.
C) goods or services are purchased from suppliers in a foreign country.
D) accounting reports are prepared in a foreign currency.
Answer: A Level: Medium LO: 2
7. As 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.
Answer: A Level: Medium LO: 2
8. Purchasing an option to buy foreign currency at a predetermined exchange rate in
order to reduce exchange risk is called:
A) transfer pricing.
B) hedging.
C) translating.
D) cross-listing.
Answer: B Level: Easy LO: 2
, 9. What term is used to describe the process of reducing foreign exchange risk?
A) international accounting
B) exposure
C) hedging
D) harmonization
Answer: C Level: Easy LO: 2
10. The ownership and control of foreign assets such as a manufacturing plant is called:
A) a hedge.
B) foreign direct investment.
C) exposure.
D) derivatives.
Answer: B Level: Easy LO: 3
1. Which of the following groups is a supranational organization?
A) United Nations
B) Organization for Economic Cooperation and Development
C) International Federation of Accountants
D) All of the above
Answer: D Level: Easy LO: 1
2. Determination of net present value involves:
A) forecasting future profits and cash flows.
B) discounting future cash flows back to their present value.
C) analysis on an after-tax basis.
D) All of the above
Answer: D Level: Medium LO: 1
3. International accounting can be defined in terms of which the following levels?
A) Supranational organizations
B) Company
C) Country
D) All of the above
Answer: D Level: Easy LO: 1
,4. The factor used to convert from one country's currency to another country's
currency is called the:
A) Interest rate.
B) Cost of capital.
C) Exchange rate.
D) Strike price.
Answer: C Level: Easy LO: 2
5. What is the term used to describe the possibility that a foreign currency will
decrease in US$ value over the life of an asset such as Accounts Receivable?
A) foreign exchange translation
B) foreign exchange risk
C) hedging
D) foreign currency options
Answer: B Level: Medium LO: 2
,6. Foreign exchange risk arises when:
A) business transactions are denominated in foreign currencies.
B) sales are made to customers in a foreign country.
C) goods or services are purchased from suppliers in a foreign country.
D) accounting reports are prepared in a foreign currency.
Answer: A Level: Medium LO: 2
7. As 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.
Answer: A Level: Medium LO: 2
8. Purchasing an option to buy foreign currency at a predetermined exchange rate in
order to reduce exchange risk is called:
A) transfer pricing.
B) hedging.
C) translating.
D) cross-listing.
Answer: B Level: Easy LO: 2
, 9. What term is used to describe the process of reducing foreign exchange risk?
A) international accounting
B) exposure
C) hedging
D) harmonization
Answer: C Level: Easy LO: 2
10. The ownership and control of foreign assets such as a manufacturing plant is called:
A) a hedge.
B) foreign direct investment.
C) exposure.
D) derivatives.
Answer: B Level: Easy LO: 3
