Which of the Following Defines a Foreign-Based Entity That Uses

question 23

Multiple Choice

Which of the following defines a foreign-based entity that uses a functional currency different from the local currency?
I.A U.S.subsidiary in Britain maintains its accounting records in pounds sterling,with the majority of its transactions denominated in pounds sterling.
II.A U.S.subsidiary in Peru conducts virtually all of its business in Latin America,and uses the U.S.dollar as its major currency.

• A) I.
• B) II.
• C) Both I and II.
• D) Neither I nor II.

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Definitions:

U.S. Treasury Bills

Short-term government securities issued by the United States Department of the Treasury with maturity periods ranging from a few days to 52 weeks.

Average Rate of Return

The average annual income earned through an investment, expressed as a percentage of the original investment.

Investment Banks

Financial institutions specializing in complex financial transactions such as underwriting, acting as intermediaries in mergers and acquisitions, and issuing new securities.

Capital

Wealth in the form of money or other assets owned by a person or organization or available for a purpose such as starting a company or investing.