Which of the Statement Below Is FALSE

question 37

Multiple Choice

Which of the statement below is FALSE?

• A) With an unexpected increase in exchange rates, the future cash flow of overseas operations can be less than anticipated, and thus the value of the business falls.
• B) A company has one more added risk exposure when dealing with foreign operations even if forward rates can be used to hedge a falling profit margin caused by unfavorable changes in exchange rates,
• C) Not all products and costs inflate at the same rate as the overall inflation rate of a country.
• D) Translation principles in many countries require the use of current exchange rates for certain equity, fixed asset, and inventory accounts, but historical exchange rates for current assets, current liabilities, and income accounts.

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Definitions:

Prepaid Expenses

Expenses paid in advance for goods or services to be received in the future, recognized as assets on the balance sheet until used or consumed.

Net Cash

The difference between a company's total cash inflows and outflows over a specific period.

Operating Activities

Transactions and events that affect a company's net income, related to its primary business operations.

Financing Activities

These activities generate cash inflows and outflows related to borrowing from and repaying principal to creditors and completing transactions with the company’s owners, such as selling or repurchasing shares of common stock and paying dividends.