Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Chapter 19.4, Problem 19.9RQ
Summary Introduction
To discuss: The
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Which of the following considerations would not be relevant in
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The currency in which receipts from operating activities are retained
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What are the relevant cash flows for an international investment—the cash flowsproduced by the subsidiary in the country in which it operates or the cash flows indollars that it sends to its parent company? Explain.
What are the relevant cash flows for an international investment:the cash flow produced by the subsidiary in the country whereit operates, or the cash flows in dollars that it sends to its parentcompany?
Chapter 19 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 19.1 - Prob. 19.1RQCh. 19.1 - Prob. 19.2RQCh. 19.1 - Prob. 19.3RQCh. 19.1 - Prob. 19.4RQCh. 19.2 - Under FASB No. 52, what are the translation rules...Ch. 19.3 - Prob. 19.6RQCh. 19.3 - Explain how differing inflation rates between two...Ch. 19.3 - Discuss macro and micro political risk. What is...Ch. 19.3 - Prob. 1FOECh. 19.4 - Prob. 1GF
Ch. 19.4 - Prob. 19.9RQCh. 19.4 - Prob. 19.10RQCh. 19.4 - Prob. 19.11RQCh. 19.4 - Prob. 19.12RQCh. 19.5 - Prob. 19.13RQCh. 19.5 - Prob. 19.14RQCh. 19.5 - Prob. 19.15RQCh. 19.6 - Prob. 19.16RQCh. 19 - Prob. 1ORCh. 19 - Prob. 19.1WUECh. 19 - Prob. 19.2WUECh. 19 - Prob. 19.3WUECh. 19 - Prob. 19.4WUECh. 19 - Prob. 19.5WUECh. 19 - Prob. 19.1PCh. 19 - Prob. 19.2PCh. 19 - Prob. 19.3PCh. 19 - ETHICS PROBLEM Is there a conflict between...
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- 1. Once determined, the functional currency is * A. No answer B. Changed every time new PFRS is issued. C.Changed at the discretion of the entity’s management D. Not changed unless there is a change in underlying transactions, events, and conditions. 2. Which of the following is least relevant in determining an entity’s functional currency? A. The currency in which cash flows from operating activities are retained. B. The currency that influences the entity’s sale prices and costs. C. The currency in which the entity generates financing cash flows. D. The currency of the country in which the entity is located. 3. According to PAS 21, exchange differences arising from the translation of financial statements to a presentation currency are recognized in * A. Any of these B. Other comprehensive income C. Directly in equity D. Profit or lossarrow_forwardWhich cash flows are important for an overseas investment: those generated by the subsidiary in the country in which it operates or those sent to the parent firm in dollars?arrow_forwardCash presents special internal control challenges. How do internal controls for cash differ for accounting systems reporting under IFRS versus U.S. GAAP? How do the procedures applied differ across those two accounting systems?arrow_forward
- PAS 16 states that if an exchange transaction causes a significant change in cash flows, the transaction has commercial substance. In transactions of this type, at what amount should the entity record the asset received? Book Value plus Boot Book Value Fair Value inminsic valuearrow_forwardA). Why do we need to translate the financial statement of foreign operations? B). Explain the concepts of local currency, functional currency and presentation, orrency with example. K C). How is the profit or loss from translating foreign operations' financial statements from local currency to functional currency treated? D) How are the profit and loss from translating foreign ope ions' financial statements from functional currency to presentation currency treated?arrow_forwardDiscuss two general functions involved in international cash management and explain how the MNC’s optimization of cash flow can distort the profits of a subsidiary that is based in North America.arrow_forward
- 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?arrow_forwardWhat term is used to describe the process of reducing foreign exchange risk? Choose the correct. A)international accounting B)exposure C)hedging D)harmonizationarrow_forward1. For reporting purposes, currencies are defined as Operating, International and presentation Domestic and international Foreign, functional and presentation International and functional 2. The functional currency is Currency in which the entity reports earnings. The currency in which the entity primarily operates. The currency in which the entity presents the financial statements. The currency in which the entity primarily conducts banking activities 3. Which consideration would not be relevant in determining the entity's functional currency? The currency in which receipts from operating activities are retained. The currency in which finance or fund is generated The currency that influences the cost of the entity. The currency that the most internationally acceptable for trading 4. Under IFRS, how is presentation currency defined? The currency in which the financial statements are presented. The currency that uses the current rate The currency of…arrow_forward
- The currency in which most of the inflows and outflows of the entity is denominated pertains to transaction currency. TRUE OR FALSEarrow_forwardQ1. Explain the differences between translation and remeasurement of financial statements of a foreign subsidiary.arrow_forwardAssume that a subsidiary operated in a foreign country, keeps its accounting records in a foreign currency that captures the underlying economics of the subsidiary, and operates independently of the parent company. Which if the following is true? Translation adjustments have an immediate effect on cash flows Translation adjustments should be reflected in earnings a. No No b. No Yes c. Yes No d. Yes Yesarrow_forward
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