When a Business Wants to Smooth Out the Timing of Its

question 3

Multiple Choice

When a business wants to smooth out the timing of its monthly mismatch between cash inflows and outflows and day-to-day working capital requirements,it usually:

• A) issues bank bills.
• B) arranges a bank overdraft facility.
• C) issues a debenture.
• D) issues commercial paper.

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Definitions:

Functional Currency

The currency of the primary economic environment in which an entity operates, typically used in preparing financial statements.

Translation Rate

The rate used to convert financial statements of a foreign operation into the presentation currency of the reporting entity.

Foreign Currency

Currency that is used in a country other than the one where a company or individual is based.

Foreign Exchange

The conversion of one country's currency into another currency.