If an MNC Financed with a Currency Different from Its

question 2

Multiple Choice

If an MNC financed with a currency different from its invoice currency, it would prefer that the loan be denominated in a currency that:

• A) exhibits a low interest rate and is expected to appreciate.
• B) exhibits a low interest rate and is expected to depreciate.
• C) exhibits a high interest rate and is expected to depreciate.
• D) exhibits a high interest rate and is expected to appreciate.

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Definitions:

Permanent Account

An account in the general ledger that is not closed at the end of the accounting period, with its balances carried over into the next period.

Temporary Account

A temporary account is an account that is closed at the end of each accounting period, with its balances transferred to permanent accounts, used to track revenues, expenses, and withdrawals during the period.

Retained Earnings

Cumulative net income minus dividends paid to shareholders, representing the business's reinvested profits.

Accounting Information System

A structure that collects, stores, manages, processes, retrieves, and reports financial data for its users, facilitating informed business decisions.