Depreciation of the Euro Relative to the U

question 55

Multiple Choice

Depreciation of the euro relative to the U.S. dollar will cause a U.S.-based MNC's reported earnings (from the consolidated income statement) to ____. If a firm desired to protect against this possibility, it could stabilize its reported earnings by ____ euros forward in the foreign exchange market.

• A) be reduced; purchasing
• B) be reduced; selling
• C) increase; selling
• D) increase; purchasing

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Definitions:

Promissory Notes

Written promises to pay a specified sum of money to a certain person or entity at a defined time or on demand.

Legal Claim

A demand for compensation, payment, or property by a person or entity asserting a right against another in a court of law.

Note Receivable

A financial asset representing a written promise to receive a specific amount of money, plus interest, at a future date.

Negotiable Instrument

A document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payer named on the document.