If the British Subsidiary of a European Firm Has Net

question 39

Multiple Choice

If the British subsidiary of a European firm has net exposed assets of £125,000, and the pound increases in value from €1.40/£ to €1.44/£, the European firm has a translation:

• A) loss of €5,000.
• B) gain of €5,000.
• C) gain of £5,000.
• D) loss of £5,000.

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Definitions:

Estimated Cost

An approximation of the financial expenses associated with a project, product, or service before it is fully realized.

Physical Inventory

A process of counting all the physical goods and inventory in a store or warehouse at a specific point in time.

Merchandise Sold

The total quantity of goods that have been sold by a business within a particular period.

Understated Inventory

A situation where the recorded amount of inventory is less than the actual inventory on hand, leading to distorted financial statements.