A U.S.-based company that exports goods and has accounts receivable denominated in a foreign currency ________. A. faces no risk if the relations between the countries get rough. B. faces the risk that the U.S. dollar will depreciate in value relative to the foreign currency. C. faces the risk that the U.S. dollar will appreciate in value relative to the foreign currency. D. faces the risk that the foreign currency would appreciate in value relative to the U.S. dollar.
Added by Tom-S M.
Step 1
S. dollar appreciates in value relative to the foreign currency, the value of the accounts receivable (denominated in the foreign currency) would decrease when converted back to U.S. dollars. This would result in a loss for the company. Show more…
Show all steps
Your feedback will help us improve your experience
Akash M and 60 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
If the U.S. interest rate, adjusted for people's expectation of inflation, increases sharply relative to the rest of the world, then A. The dollar will depreciate B, There will be no change in the demand for dollars in foreign exchange markets but there will be an increase in demand for foreign currency C. there will be a decrease in the demand for dollars in foreign exchange markets D. thee dollar will appreciate
Jennifer S.
An appreciation of the dollar against all currencies in the foreign exchange market would result in all of the following, except: a) a decrease in the dollar prices paid by U.S. importers. b) an increase in the cost of vacations in Florida for Japanese tourists. c) foreign holidays for U.S. residents to be less expensive. d) an increase in the foreign currency prices paid for U.S. exports. e) an increase in the demand for U.S. exports.
Crystal W.
In preparing their financial statements, U.S. firms with sales in foreign currencies have to engage in "foreign currency translations"; that is, they have to convert foreign currency values into U.S. dollars. In its 2014 Annual Report, IBM made the following statement: "As with all companies with a similar global business profile, with the dollar strengthening, the company also expects that currency will have a significant translation impact on its profit growth." a. What does the report mean by "the dollar strengthening"? b. As a U.S.-based company, doesn't IBM benefit when the U.S. dollar is stronger? Briefly explain.
Macroeconomics in an Open Economy
The Foreign Exchange Market and Exchange Rates
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD