If the Domestic Currency Is Strong or Expected to Become

question 11

Multiple Choice

If the domestic currency is strong or expected to become strong,

• A)a firm can choose to locate production facilities in a foreign country where costs are low due to either the undervalued currency or underpriced factors of production.
• B)a firm should curtail R&D efforts until the exchange rate situation improves.
• C)a firm should abandon international sales and focus on domestic market share.
• D)the firm should focus on profiting in the currency futures market based on its forecasts.

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Definitions:

Cash Flows

The entirety of monetary transactions coming into and going out of a corporation, crucially affecting its immediate financial resources.

Indirect Method

An approach to preparing the cash flow statement where the net income is adjusted for non-cash transactions and changes in working capital to estimate cash flows from operating activities.

Cash Dividends

A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.

Long-Term Investments

Assets that a company intends to hold for more than one year, including stocks, bonds, and real estate.