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If the firm were to create a new consolidated balance sheet and translate the value of its inventory at the new spot exchange rate, what would happen to the dollar value of inventory? O It would decrease by $3,135. O It would decrease by $2,850. O It would increase by $3,420. It would increase by $2,850. The change in inventory value was created purely by accounting and exchange rate factors, because the subsidiary still has the same inventory and assets in place. However, this change would affect Streep's consolidated financial statements and ratios. Assuming no other changes occurred, what effect would this have on Streep's inventory turnover ratio? The inventory turnover ratio would decrease. O The inventory turnover ratio would increase

If the firm were to create a new consolidated balance sheet and translate the value of its inventory at the new spot exchange rate, what would happen to the dollar value of inventory? O It would decrease by $3,135. O It would decrease by $2,850. O It would increase by $3,420. It would increase by $2,850. The change in inventory value was created purely by accounting and exchange rate factors, because the subsidiary still has the same inventory and assets in place. However, this change would affect Streep's consolidated financial statements and ratios. Assuming no other changes occurred, what effect would this have on Streep's inventory turnover ratio? The inventory turnover ratio would decrease. O The inventory turnover ratio would increase

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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10. Multinational working capital management Aa Aa Multinational companies are exposed to complex management and allocation of their resources. A multinational company's cash management, credit management, inventory management, and so on, need to have several additional elements factored in compared with those of a purely domestic corporation. Consider this case: Multinational Inventory Management Streep Inc. is a U.S.-based multinational firm with a Decisions related to amount of investment in subsidiary in Switzerland. Last week, Streep created its inventory and inventory policy need to factor in periodic financial statements, and the subsidiary had the following: SFr 60,000 worth of inventory on its balance sheet. Streep translated the value of inventory using the spot • Exchange rates exchange rate at that time of $0.8153 / SFr and recorded • Possibility of import and export quotas or that value on its consolidated balance sheet. tariffs However, this week the exchange rate changed Tax consequences dramatically to $0.7678 / SFr. The subsidiary still has the • Possibility of at-sea storage same amount of inventory (valued at SFr 60,000). If the firm were to create a new consolidated balance sheet and translate the value of its inventory at the new spot exchange rate, what would happen to the dollar value of inventory? It would decrease by $3,135. It would decrease by $2,850. It would increase by $3,420. It would increase by $2,850. The change in inventory value was created purely by accounting and exchange rate factors, because the subsidiary still has the same inventory and assets in place. However, this change would affect Streep's consolidated financial statements and ratios. Assuming no other changes occurred, what effect would this have on Streep's inventory turnover ratio? The inventory turnover ratio would decrease. The inventory turnover ratio would increase.
Transcribed Image Text:10. Multinational working capital management Aa Aa Multinational companies are exposed to complex management and allocation of their resources. A multinational company's cash management, credit management, inventory management, and so on, need to have several additional elements factored in compared with those of a purely domestic corporation. Consider this case: Multinational Inventory Management Streep Inc. is a U.S.-based multinational firm with a Decisions related to amount of investment in subsidiary in Switzerland. Last week, Streep created its inventory and inventory policy need to factor in periodic financial statements, and the subsidiary had the following: SFr 60,000 worth of inventory on its balance sheet. Streep translated the value of inventory using the spot • Exchange rates exchange rate at that time of $0.8153 / SFr and recorded • Possibility of import and export quotas or that value on its consolidated balance sheet. tariffs However, this week the exchange rate changed Tax consequences dramatically to $0.7678 / SFr. The subsidiary still has the • Possibility of at-sea storage same amount of inventory (valued at SFr 60,000). If the firm were to create a new consolidated balance sheet and translate the value of its inventory at the new spot exchange rate, what would happen to the dollar value of inventory? It would decrease by $3,135. It would decrease by $2,850. It would increase by $3,420. It would increase by $2,850. The change in inventory value was created purely by accounting and exchange rate factors, because the subsidiary still has the same inventory and assets in place. However, this change would affect Streep's consolidated financial statements and ratios. Assuming no other changes occurred, what effect would this have on Streep's inventory turnover ratio? The inventory turnover ratio would decrease. The inventory turnover ratio would increase.
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