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objective 23 5 1 inflation clouds the real economic returns on an asset and a makes 4301099

 

Objective 23.5

 

1) Inflation clouds the real economic returns on an asset and ________.

A) makes variable-cost-based ROI higher

B) makes historical-cost-based ROI lower.

C) makes historical-cost-based ROI higher

D) makes variable-cost-based ROI lower

 

2) Which of the following statements is true?

A) The economic, legal, political, social, and cultural environments differ across countries.

B) The import quotas and tariffs remain the same across all countries according to the standards set by United Nations.

C) The advances in telecommunications and transportation, the availability of materials and skilled labor does not differ significantly across countries.

D)  The fixed rate policy is followed across all countries to avoid price fluctuations and inflation.

 

3) ________ would be an uncontrollable factor that a firm would need to consider when evaluating the return on investment of an international division.

A) Manager's experience

B) Manager's compensation

C) Pricing decisions

D) Custom duties

4) In performance evaluations ________.

A) managers should use the swap exchange rate prevailing at the end of a financial period

B) managers should use the average exchange rate prevailing at the end of a financial period

C) managers should use the exchange rate prevailing on the date the assets were acquired

D) managers should use the exchange rate prevailing at the end of a financial period

 

5) Ventaz Corp. purchased assets for its overseas branch for $10,000. The rate of conversion at the time of purchase of asset was $1.306 / Euro. What is the value of assets after  two years if the rate is $1.508 / Euro and the average rate being $1.407 / Euro?

A) 7,657 Euros

B) 5,080 Euros

C) 4,070 Euros

D) 3,780 Euros

 

6) Megatron Corp. earned net income of 13,000 Euros in its overseas branch at France. Its headquarters is located in the U.S. The rate of conversion during set up was $1.306 / Euro. What is the value of its income in its home currency if the rate is $1.508 / Euro at the end of a financial year and the average rate being $1.407 / Euro?

A) $16,060

B) $18,291

C) $14,070

D) $19,768

 

7) Inflation and fluctuations in foreign-currency exchange rates affect performance measurement.

 

8) Higher inflation will lead to higher prices for goods or services, which will increase a company's operating income and lead to a higher ROI.

9) To convert the operating income for an overseas branch into US dollars, the historical rate of exchange is used for its conversion into US dollars.

 

10) To calculate the value of fixed assets for an overseas branch, the historical rate of exchange is used for its conversion.

 

 

 

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