If the Functional Currency of a Foreign Subsidiary Is the Currency

question 19

Multiple Choice

If the functional currency of a foreign subsidiary is the currency of the country where the subsidiary is located, the translation method that should be selected is the

• A) temporal method
• B) current rate method
• C) monetary/nonmonetary method
• D) the current rate method if the rate of inflation is the foreign country is 25% per month.

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Definitions:

Commercial Bank Loans

are loans that businesses and individuals can obtain from a commercial bank to finance various needs, such as business expansion or personal expenses.

Short-Term Financing

Refers to borrowing funds for a period of less than one year to meet immediate financial requirements.

Spontaneous Financing

Financing that naturally increases as a firm's operating levels increase, typically through trade credits and accruals.

Five Year Bonds

Debt securities issued with a maturity of five years, typically paying interest semi-annually.