Thornton Corporation Has Extensive Liabilities Denominated in Cyprus Pounds Resulting

question 10

Multiple Choice

Thornton Corporation has extensive liabilities denominated in Cyprus pounds resulting from imports from Cyprus. However, Thornton's revenues are denominated solely in U.S. dollars. Which of the following is probably not true?

• A) Thornton would benefit from a depreciation of the Cyprus pound.
• B) Thornton has at least some transaction exposure.
• C) Thornton has at least some economic exposure.
• D) Thornton has at least some translation exposure.
• E) All of the above are true.

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Definitions:

Stockholders' Equity

Stockholders' equity represents the residual interest in the assets of an entity after deducting liabilities, essentially the net worth attributable to shareholders.

Accumulated Other Comprehensive Income

This is a component of shareholders' equity apart from retained earnings that includes items such as foreign currency translation adjustments and unrealized gains on securities.

Common Stock

Equity ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.