If a Firm's Balance Sheet Has an Equal Amount of Exposed

question 33

Multiple Choice

If a firm's balance sheet has an equal amount of exposed foreign currency assets and liabilities and the firm translates by the temporal method, then

• A) the net exposed position is called monetary balance.
• B) the change of value of liabilities and assets due to a change in exchange rates will be of equal but opposite direction.
• C) both A and B are true.
• D) none of the above.

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Definitions:

Indirect Method

A technique used in cash flow statements to adjust net income for changes in non-cash operating activities to calculate net cash provided by operating activities.

Operating Activities

Activities directly related to the daily business operations, including cash inflows and outflows from selling products and services.

Merchandise

Merchandise refers to goods or products that are purchased for resale by retail or wholesale traders, forming the primary inventory in their business operations.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments, not including cash equivalents.