Chapter 12 Managing Economic Exposure and
Translation Exam
Study Guide.
Comprehensive Latest Updated Exam Study
Guide 2024/2025
?
,Chapter 12 Managing Economic Exposure and
Translation Exam
Study Guide.
Comprehensive Latest Updated Exam Study
Guide 2024/2025
1. Depreciation of the euro relative to the U.S. dollar will cause a U.S.-based multinational firm's
reported earnings (from the consolidated income statement) to . If a firm desired to protect against
this possibility, it could stabilize its reported earnings by euros forward in the foreign exchange
market.
a. be reduced; purchasing
b. be reduced; selling
c. increase; selling
d. increase; purchasing
ANS: B PTS: 1
2. Springfield Co., based in the U.S., has a cost from orders of foreign material that exceeds its foreign
revenue. All foreign transactions are denominated in the foreign currency of concern. This firm would
a stronger dollar and would a weaker dollar.
a. benefit from; be unaffected by
b. benefit from; be adversely affected by
c. be unaffected by; be adversely affected by
d. be unaffected by; benefit from
e. benefit from; benefit from
ANS: B PTS: 1
3. Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million. Its cost of
materials attributable to the purchase of Canadian goods is C$6 million. Its interest expense on
Canadian loans is C$4 million. Given these exact figures above, the dollar value of Whitewater's
"earnings before interest and taxes" would if the Canadian dollar appreciates; the dollar value of
Whitewater's cash flows would if the Canadian dollar appreciates.
a. increase; increase
b. decrease; increase
c. decrease; decrease
d. increase; decrease
e. increase; be unaffected
ANS: D PTS: 1
4. Sycamore (a U.S. firm) has no subsidiaries and presently has sales to Mexican customers amounting to
MXP98 million, while its peso-denominated expenses amount to MXP41 million. If it shifts its
material orders from its Mexican suppliers to U.S. suppliers, it could reduce peso-denominated
expenses by MXP12 million and increase dollar-denominated expenses by $800,000. This strategy
would the Sycamore's exposure to changes in the peso's movements against the U.S. dollar.
Regardless of whether the firm shifts expenses, it is likely to perform better when the peso is valued
relative to the dollar.
a. reduce; high
b. reduce; low
c. increase; low
?
, Chapter 12 Managing Economic Exposure and
Translation Exam
Study Guide.
Comprehensive Latest Updated Exam Study
Guide 2024/2025
d. increase; high
ANS: D PTS: 1
5. Which of the following is an example of economic exposure but not an example of transaction
exposure?
?
Translation Exam
Study Guide.
Comprehensive Latest Updated Exam Study
Guide 2024/2025
?
,Chapter 12 Managing Economic Exposure and
Translation Exam
Study Guide.
Comprehensive Latest Updated Exam Study
Guide 2024/2025
1. Depreciation of the euro relative to the U.S. dollar will cause a U.S.-based multinational firm's
reported earnings (from the consolidated income statement) to . If a firm desired to protect against
this possibility, it could stabilize its reported earnings by euros forward in the foreign exchange
market.
a. be reduced; purchasing
b. be reduced; selling
c. increase; selling
d. increase; purchasing
ANS: B PTS: 1
2. Springfield Co., based in the U.S., has a cost from orders of foreign material that exceeds its foreign
revenue. All foreign transactions are denominated in the foreign currency of concern. This firm would
a stronger dollar and would a weaker dollar.
a. benefit from; be unaffected by
b. benefit from; be adversely affected by
c. be unaffected by; be adversely affected by
d. be unaffected by; benefit from
e. benefit from; benefit from
ANS: B PTS: 1
3. Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million. Its cost of
materials attributable to the purchase of Canadian goods is C$6 million. Its interest expense on
Canadian loans is C$4 million. Given these exact figures above, the dollar value of Whitewater's
"earnings before interest and taxes" would if the Canadian dollar appreciates; the dollar value of
Whitewater's cash flows would if the Canadian dollar appreciates.
a. increase; increase
b. decrease; increase
c. decrease; decrease
d. increase; decrease
e. increase; be unaffected
ANS: D PTS: 1
4. Sycamore (a U.S. firm) has no subsidiaries and presently has sales to Mexican customers amounting to
MXP98 million, while its peso-denominated expenses amount to MXP41 million. If it shifts its
material orders from its Mexican suppliers to U.S. suppliers, it could reduce peso-denominated
expenses by MXP12 million and increase dollar-denominated expenses by $800,000. This strategy
would the Sycamore's exposure to changes in the peso's movements against the U.S. dollar.
Regardless of whether the firm shifts expenses, it is likely to perform better when the peso is valued
relative to the dollar.
a. reduce; high
b. reduce; low
c. increase; low
?
, Chapter 12 Managing Economic Exposure and
Translation Exam
Study Guide.
Comprehensive Latest Updated Exam Study
Guide 2024/2025
d. increase; high
ANS: D PTS: 1
5. Which of the following is an example of economic exposure but not an example of transaction
exposure?
?
