When Using a Budget for Foreign Operations, It Is Important

question 74

True/False

When using a budget for foreign operations, it is important for the parent company to select an exchange rate to set the budget and use that same rate to evaluate performance.

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Definitions:

Exchange Rates

The value of one currency expressed in terms of another currency, used in international transactions and foreign exchange markets.

Foreign Exchange Loss

A decrease in domestic currency value due to holding foreign currency or financial instruments as they depreciate against the home currency.

Forward Contract

A financial instrument agreement to buy or sell an asset at a predetermined future date and price.

Spot Rate

The present going rate for a specific currency to be purchased or exchanged, available for prompt delivery.