If the British Subsidiary of a European Firm Has Net

question 25

Multiple Choice

If the British subsidiary of a European firm has net exposed assets of £250,000, and the pound increases in value from 1.40/£ to €1.45/£, the European firm has a translation ________.

• A)gain of €25,000
• B)loss of €25,000
• C)gain of £25,000
• D)loss of £25,000

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Definitions:

Period Costs

Costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued.

Segmented Income Statements

Financial statements that divide a company's financial performance into segments, such as departments or product lines, to assess each segment's profitability separately.

CM Ratio

The contribution margin ratio, calculated as the contribution margin divided by net sales revenue, indicating the proportion of sales revenue available to cover fixed costs and generate profit.

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific department, project, or segment of a business.