A US Company Has a Subsidiary Located in Great Britain

question 46

Multiple Choice

A U.S. company has a subsidiary located in Great Britain. If the British pound is the functional currency and is appreciating relative to the dollar, what will happen to the following ratios after translation? $$\begin{array}{l}\text { Debt-to-equity } \quad \text { Net profit margin }\\\begin{array} { l c c } \text { A) } & \text { Higher } & \text { Lower } \\\text { B) } & \text { Higher } & \text { Same } \\\text { C) } & \text { Same } & \text { Same } \\\text { D) } & \text { Lower } & \text { Higher }\end{array}\end{array}$$

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

Cost of Goods Manufactured

The total production cost of goods that have been completed in a specific accounting period, including labor, materials, and overhead costs.

Depreciation Expense

Distributing the cost of a physical asset methodically over the time it is useful.

Direct Labor

The labor or workforce directly involved in the production of goods or providing services, considered a variable cost in manufacturing.

Factory Overhead

All indirect costs incurred during the production of goods, such as utilities, depreciation, and salaries of maintenance employees.