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CFA Level 2 - FRA
Study Session 6: Reading 21 - Multinational Operations
Quiz #1 by mikesswimn
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In the application of the current rate method, which of the following financial statement items are translated using the current rate?
Accounts Receivables, Accounts Payable, Common Stock
Inventory, COGS, Dividends
Accounts Receivable, PP&E, Long-term debt
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When applying either the temporal method or the current rate method to the income statement, which rates are used?
Temporal Method: Historical Rates, Current Rate Method: Average Rate
Temporal Method: Historical Rates & Average Rates, Current Rate Method: Average Rate
Temporal Method: Average Rate, Current Rate Method: Historical Rates
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For a US firm with an Italian subsidiary that is well-integrated with the parent company, which of the following would be translated at the current rate?
Accounts receivable, accounts payable, inventory
Held-for-trading securities, accounts payable, short-term debt
PP&E, cash & equivalents, long-term debt
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Which of the following financial statement items are remeasured in the same way under both the Temporal Method and the Current Rate Method?
SG&A, acccounts receivable, common stock
Inventory, cash & equivalents, depreciation & amortization
Revenues, COGS, common stock
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Translation gains and losses are reported where and how under the Temporal Method and Current Rate Method?
Current Rate Method: As an expense on the income statement called "Cumulative Translation Adjustment", Temporal Method: On the income statement.
Current Rate Method: As a liability on the balance sheet, Temporal Method: As an asset on the balance sheet.
Current Rate Method: Under shareholders' equity, Temporal Method: On the income statement.
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Which of the following is a definition for the "Historical Rate"?
The actual exchange rate that was in effect for a given transaction.
The average rate experienced over the life of the firm
The rate at the prior balance sheet date
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Which of the following ratios are considered "pure" when using the Current Rate Method?
Return on Assets
Quick Ratio
Receivables Turnover
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Assuming that a foreign currency is appreciating, which of the following ratios will be smaller?
Return on Equity
Current Ratio
Days of Inventory on Hand
