What Is the Cause of Balance Sheet Exposure

question 54

Multiple Choice

What is the cause of balance sheet exposure?

• A) Converting subsidiary account balances to balances denominated in the parent company's currency at historical exchange rates
• B) Completing international transactions in currency other than the currency of the home company
• C) Translating subsidiary account balances to amounts denominated in the parent company's currency
• D) None of the above

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Definitions:

Equity Method Investments

An accounting technique used to record investments in which the investor has significant influence over the investee but does not control it outright, typically through the ownership of 20% to 50% of the voting stock.

Cash Dividends

A financial distribution in the form of cash from a corporation to its investors as profits.

Dividend Revenue

Income received from owning shares in a company when the company decides to distribute some of its earnings to shareholders.

Unrealized Gain

The paper profit attributed to an investment that has increased in value but has not yet been sold by the investor.