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

question 78

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:

Grossprofit Ratio

A financial metric that measures the proportion of money left over from revenues after accounting for the cost of goods sold (COGS), expressed as a percentage of sales.

Replacement Cost

The current cost of replacing an asset with a new one of similar style and quality.

Non-Cancellable

A term that describes a contract or agreement that cannot be terminated or cancelled before its expiration or predetermined end date.

Fixed Price

A pricing strategy where the cost of a good or service is not subject to change based on varying conditions such as market demand or costs of production.