CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

In general, companies with positive net assets in their foreign subsidiaries will:
A. realize a positive translation adjustment from appreciation of the foreign currency vis-a-vis the $US.
B. realize a negative translation adjustment from appreciation of the foreign currency vis-a-vis the $US.
C. translation exposure is not related to the net asset position of the company.
Explanation: Appreciation of the foreign currency vis-a-vis the $US means that it takes less foreign currency to purchase $1 or, alternatively, that each foreign currency unit is worth more $US. A net asset position means that assets are greater than liabilities. For companies in a positive net asset position, appreciation of the foreign (local) currency results in assets increasing in the $US equivalent more than liabilities, for a net positive translation adjustment.

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