Transaction Exposure and Operating Exposure Exist Because of Unexpected Changes

question 22

Multiple Choice

Transaction exposure and operating exposure exist because of unexpected changes in future cash flows. The difference between the two is that ________ exposure deals with cash flows already contracted for, while ________ exposure deals with future cash flows that might change because of changes in exchange rates.

• A) transaction; operating
• B) operating; transaction
• C) operating; accounting
• D) none of the above

Understand the principle of diminishing marginal returns.

Explain the behaviors of marginal, average, and total products as inputs vary.

Identify the point where marginal product equals average product.

Understand the implications of the law of diminishing returns on productivity and output.

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Definitions:

Deferred Tax Liability

An accounting term that refers to a tax due in the future for income that has already been recognized in the financial statements.

Effective Tax Rate

The average rate at which an individual or a corporation is taxed, calculated by dividing the total amount of taxes paid by the taxable income.

Temporary Difference

A difference that arises between the tax base of an asset or liability and its carrying amount in the financial statements, which will result in taxable or deductible amounts in future years.

Deferred Tax Liability

A tax obligation that arises when taxable income is delayed or postponed to future periods, reflecting taxes that are expected to be paid in the future.