10. Multinational working capital managementAaAaMultinational companies are exposed to complex management and allocation of their resources. A multinationalcompany's cash management, credit management, inventory management, and so on, need to have severaladditional elements factored in compared with those of a purely domestic corporation.Consider this case:Multinational Inventory ManagementStreep Inc. is a U.S.-based multinational firm with aDecisions related to amount of investment insubsidiary in Switzerland. Last week, Streep created itsinventory and inventory policy need to factor inperiodic financial statements, and the subsidiary hadthe following:SFr 60,000 worth of inventory on its balance sheet.Streep translated the value of inventory using the spot• Exchange ratesexchange rate at that time of $0.8153 / SFr and recorded• Possibility of import and export quotas orthat value on its consolidated balance sheet.tariffsHowever, this week the exchange rate changedTax consequencesdramatically to $0.7678 / SFr. The subsidiary still has the• Possibility of at-sea storagesame 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 spotexchange 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 subsidiarystill has the same inventory and assets in place. However, this change would affect Streep's consolidated financialstatements and ratios. Assuming no other changes occurred, what effect would this have on Streep's inventoryturnover ratio?The inventory turnover ratio would decrease.The inventory turnover ratio would increase.

To answer the first question, we will calculate the difference between the values of closing…

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

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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Companies that compete in an international marketplace may be faced with three types of risk owing to foreign exchange.These are: * A. specific, translation and transaction risk. B. translation, transaction and economic risk. C. accounting, transaction and translation risk. D. accounting, specific and transaction risk.
Which of the following situation is NOT the case that a domestic company is exposed to foreign currency exchange risk? a. A firm commitment to enter into a foreign currency transaction. b. A forecasted foreign currency transaction that has a high probability of occurrence. c. An investment in a domestic subsidiary. d. An actual existing foreign currency transaction that results in recognition of assets or liabilities.
Parent Corporation is located in a country with an income tax rate of 40%. Subsidiary Company located in a country with an income tax rate of 25%. The best tax strategy for the enterprise would be to set the transfer prices on sales of goods from the subsidiary to the parent at a price that is a. higher than the price that would be in effect for unrelated parties in an arms length transaction. b. lower than the price that would be in effect for unrelated parties in an arms length transaction. c. equal to the price that would be in effect for unrelated parties in an arms length transaction. d. transfer prices do not affect overall tax paid.
Using this data, calculate the following ratios: return on sales, inventory turnover, inventory-on-hand period, and current ratio.
What does the inventory turnover period ratio measure? Select one: a.Profitability. b.The average time an organisation holds inventory. c.The liquidity of the firm. d.How much the firm's current assets could decrease and still leave it able to pay its current liabilities.
Stiff Sails Corporation, a U.S. company, operates a 100%-owned British subsidiary, SeaBeW Corporation. The U.S. dollar is the functional currency of the subsidiary. Financial statements for the subsidiary for the fiscal year-end December 31, 2024, are as follows: Sales Cost of Goods Sold Beginning Inventory Purchases Cost of Goods Sold Depreciation B. Goods Available For Sale Less: Ending Inventory Selling and Admin. Expenses Income Taxes Net Income Current Assets Cash Accts. Rec. Inventories Required: A. SeaBeWe Corporation Income Statement 155,000 171,000 285,000 611,000 SeaBeWe Corporation Partial Balance Sheet 310,000 265,000 575,000 285,000 290,000 79,000 155,000 32,000 July 1, 2022 Jan. 1, 2024 June 30, 2024 Dec. 31, 2024 Average for 2024 1. Cost of Goods Sold. 2. Depreciation Expense. 3. Equipment. Other Information: 1. Equipment costing 340,000 pounds was acquired July 1, 2022, and 38,000 was acquired June 30, 2024. Depreciation for the period was as follows: Pounds 650,000…
What are the circumstances under which the capital expenditure of a foreign subsidiary might have a positive NPV in local currency terms but be unprofitable from the parent firm’s perspective?
Functional currency is the currency that influences sales price, labour, material and other costs of a company’s goods and services. (a) Explain factors that should also be considered to determine the functional currency of a foreign operation. (b) Explain what will happen if a business transaction is denominated in foreign currency but reported in functional currency.
Which of the following statement is correct? O Inventory Turnover Ratio is a measure of how much the market is willing to pay (per share) for one dollar's worth of the firm's recorded earnings per share, and it is measure of the market's perception as to the future earnings potential of the firm. All the answers are incorrect. The times interest earned ratio is equal to Earnings Before Taxes (EBT) divided by Debt, and it is often used to assess a company's ability to service the interest on its debt with operating income from the current period. Asset activity ratios measure the ability of a firm to meet its short-term obligations. O When the investors have more confidence about the firm's future growth, then the higher P/E ratio is expected.
Please provide detailed instructions to help me solve this problem .. I’m confused on solving both the ROI. I need the instructions and formulas.
Assume that a U.S. company has a foreign subsidiary whose functional currency is the U.S. dollar. Explain how exchange rates between the foreign currency and the dollar would have to change in order to result in a current-year remeasurement loss and how the company could use a foreign currency loan receivable or payable to hedge against its net investment in the foreign subsidiary.
To be a reportable segment, the segment profit or loss should be at least what amount?

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