A US Company Has a Subsidiary Located in Great Britain

question 60

Multiple Choice

A U.S. company has a subsidiary located in Great Britain. If the U.S. dollar is the functional currency and the British pound is appreciating relative to the dollar, what will happen to the following ratios after remeasurement? $$\begin{array} { | l | c | c | } \hline & \text { Inventory Turnover } & \text { Net Profit Margin } \\\hline \text { A) } & \text { Higher } & \text { Lower } \\\hline \text { B) } & \text { Lower } & \text { Lower } \\\hline \text { C) } & \text { Higher } & \text { Higher } \\\hline \text { D) } & \text { Lower } & \text { Higher } \\\hline\end{array}$$

• A) Choice A
• B) Choice B
• C) Choice C
• D) Choice D

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Definitions:

Straight-Line Method

A method of calculating depreciation of an asset by evenly spreading the cost over its useful life.

Residential Rental Properties

Real estate properties that are leased or rented out to individuals to live in, as opposed to commercial properties.

Flow-Through Entities

Business entities that pass their income, deductions, and credits down to their owners for tax purposes, avoiding taxation at the corporate level.

LLC's

Stands for Limited Liability Companies, a business structure in the U.S. that offers personal liability protection to its owners but can be taxed as a partnership.