If a Firm's Balance Sheet Has an Equal Amount of Exposed

question 22

Multiple Choice

If a firm's balance sheet has an equal amount of exposed foreign currency assets and liabilities and the firm translates by the temporal method, then

• A)the net exposed position is called monetary balance.
• B)the change is value of liabilities and assets due to a change in exchange rates will be of equal but opposite direction.
• C)both A and B are true.
• D)none of the above

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Definitions:

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell products, and collect cash from customers.

Average Collection Period

The average number of days it takes for a company to receive payments owed by its customers, indicating the effectiveness of its credit and collection policies.

Inventory Turnover

A figure representing the frequency at which a business's stock is both sold and refilled over an assigned period, showing the adeptness of inventory administration.

Accounts Receivable Turnover

A financial metric that measures how efficiently a company collects payments from its customers by dividing total sales by average accounts receivable.