A Net Liability Balance Sheet Exposure Exists and the Foreign

question 27

Multiple Choice

A net liability balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true?

• A) There is no translation adjustment.
• B) There is a transaction loss.
• C) There is a transaction gain.
• D) There is a negative translation adjustment.
• E) There is a positive translation adjustment.

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Definitions:

Specialization

The process of focusing on a limited scope of activities, products, or services to gain efficiency or expertise.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than others.

Exchange Rate

The value of one country's currency in terms of another currency.

Import

The purchase of goods or services produced in a foreign country for use in the domestic market.