If the Functional Currencies for Reporting Purposes Are Highly Correlated

question 29

True/False

If the functional currencies for reporting purposes are highly correlated, translation exposure is magnified.

---

Definitions:

Indirect Method

Indirect method refers to a way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to compute cash flow from operating activities.

Operating Activities

Business activities related to the company's principal revenue-generating operations, including production, sales, and distribution.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operating costs, from its total revenues.

Indirect Method

A method used in cash flow statement preparation that starts with net income and adjusts for non-cash transactions to reflect the cash inflows and outflows from operating activities.