Under Both the Temporal Method and the Current Rate Method,what

question 18

Multiple Choice

Under both the temporal method and the current rate method,what exchange rate should be used to translate a foreign subsidiary's dividends into parent company currency?

• A)current rate
• B)historical rate
• C)average rate
• D)Any of the above methods may be used under both the temporal and current method.

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Definitions:

EBIT

Earnings Before Interest and Taxes, a measure of a firm's profit that includes all expenses except interest and income tax expenses.

Fixed-cost Financing

Refers to the method of raising capital where the company incurs fixed financial charges, such as interest on bonds or dividends on preferred stock, regardless of its financial performance.

Financial Leverage

A strategy involving the use of borrowed money to increase the potential return of an investment.

Operating Leverage

The use of fixed as opposed to variable cost in a firm’s cost structure.