In the Equation Profits = a + B * ($/₤

question 19

Multiple Choice

In the equation Profits = a + b * ($/₤ exchange rate) , b is a measure of

• A)the firm's beta when measured in terms of the foreign currency.
• B)the ratio of the firm's beta in terms of dollars to the firm's beta in terms of pounds.
• C)the sensitivity of profits to the exchange rate.
• D)the sensitivity of the exchange rate to profits.

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Definitions:

Operating Cycle

The period it takes for a business to acquire resources, produce inventory, sell it in the market, and eventually collect cash from the sale.

Accounts Payable Period

The average amount of time it takes for a business to pay off its suppliers and creditors for purchases made on credit.

Cash Cycle

The time period between the outlay of cash for the production process and the collection of cash from customers.

Fixed Asset Requirements

The necessary investments in long-term assets like property, plant, and equipment that a business needs to carry out its operations.