Which One of the Following Management Techniques Is Likely to Best

question 22

Multiple Choice

Which one of the following management techniques is likely to best offset the risk of long-run exposure to payables denominated in a particular foreign currency?

• A) Borrow money in the foreign currency in question.
• B) Lend money in the foreign currency in question.
• C) Rely on the Federal Reserve Board to enact monetary policy favorable to your exposure risk.
• D) none of the above

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Definitions:

Average Sale Period

This measure indicates the average duration it takes for a company to turn its inventory into sales.

Operating Cycle

The duration of time from the acquisition of inventory to the collection of cash from receivables, reflecting the company's efficiency in using its assets.

Times Interest Earned

A financial ratio that measures a company's ability to cover its interest charges with its earnings before interest and taxes (EBIT).

Debt-To-Equity Ratio

A calculation to determine a firm's financial leverage by dividing the total amount of its liabilities by the equity of its shareholders.