Consider a U

question 41

Multiple Choice

Consider a U.S.-based MNC with a wholly-owned European subsidiary selling a product sourced in euro and priced in euro with inelastic demand. Following a depreciation of the dollar against the euro, which of the following is the most true?

• A)Since they have inelastic demand, the U.S. firm can just pass through the impact of the exchange rate change.
• B)Since they have elastic demand, the U.S. firm cannot just pass through the impact of the exchange rate change.
• C)Since the exchange rate movement was favorable to the U.S. firm, there is no impact on the firm's position.
• D)None of the above.

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Definitions:

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered and invoiced but not yet paid for.

TIE Ratio

A financial performance indicator that shows a company's capacity to cover its interest expenses with its current earnings, highlighting its financial health and stability.

Target

In the business context, it generally refers to a specific objective or goal that a company or individual aims to achieve.

Operating Costs

Operating costs, or operating expenses, are the costs required for the day-to-day maintenance and administration of a business.