A European-Based Company That Makes All of Its Goods at a Plant

question 12

Multiple Choice

A European-based company that makes all of its goods at a plant in Brazil and then exports the Brazilian-made goods to country markets in many different parts of the world

• A)is competitively disadvantaged when the euro declines in value against the Brazilian real.
• B)is competitively disadvantaged when the Brazilian real declines in value against the currencies of the countries to which the Brazilian-made goods are being exported.
• C)becomes less competitive in foreign markets when the Brazilian real gains in value against the currencies of the countries to which the Brazilian-made goods are being exported.
• D)is competitively advantaged when the euro appreciates in value against the Brazilian real.
• E)has no interest in whether the euro grows stronger or weaker versus the Brazilian real unless its chief competitors are other companies located in countries whose currency is also the euro.

---

Definitions:

Liquidity

The simplicity of turning an asset into cash without impacting its market value.

Cash Flows From Operations

The net amount of cash generated or used by a company in its operational activities during a specific period.

Deferred Income Taxes

Represents taxes that are owed but not yet paid, due to differences in the timing of recognition of revenue and expenses for tax reporting and financial accounting purposes.

Income Taxes Payable

The sum of income tax that a company is liable to the government but remains unpaid.