Foreign Currency Transactions The Following Table Summarizes the Facts of Five Independent Cases

question 70

Essay

Foreign currency transactions
The following table summarizes the facts of five independent cases (labeled a through e)of American companies engaging in credit transactions with foreign corporations while the foreign exchange rate is fluctuating: Instructions:
After evaluating the information about each case,fill the blank space that has been left in one of the four columns.
The content of each column and the word or words that you should enter in the blank spaces are described below:
Column 1 indicates the type of credit transaction in which the American company engaged with the foreign corporations.The answer entered in this column should be either "Sales" or "Purchases."
Column 2 indicates the currency in which the invoice price is stated.The answer may be either "U.S.dollars" or "Foreign currency."
Column 3 indicates the direction in which the foreign currency exchange rate has moved between the date of the credit transaction and the date of settlement.The answer in this column may be either "Rising" or "Falling."
Column 4 indicates the effect of the exchange rate fluctuation upon the income of the American company.The answers entered in this column are to be selected from the following: "Gain," "Loss," or "No effect."

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, indicating how much revenue is contributing to fixed costs and profit.

Margin Ratio

A financial metric that compares a company's gross profit margin to its revenue, indicating the percentage of sales revenue that remains after accounting for the cost of goods sold.

Contribution Margin

The amount by which product sales revenue exceeds variable costs, showing how much contributes to covering fixed costs and generating profit.

Fixed Costs

Business expenses that do not change regardless of the level of production or sales activities, such as rent, salaries, and insurance.