Version 1 21
87) Kwik Foods Inc. is based in Western Europe. It is considered a legal extension of the
parent company, Portable Meals Group, based in Ohio and because of this the parent company
can deduct economic losses at Kwik Foods from its U.S. taxable income. This means that Kwik
Foods Inc. is a
A) charter.
B) subsidiary.
C) greenfield investment.
D) branch.
FILL IN THE BLANK. Write the word or phrase that best completes each statement or
answers the question.
88) The process of translating and aggregating the subsidiary reports into one company report
is ________.
89) The primary currency of a business is called its ________ currency.
90) The ________ method of foreign currency consolidation translates monetary items such
as cash, receivables, and payables at the current exchange rate.
91) John Elkington introduced the concept of ________, arguing that corporate capitalism
can become sustainable capitalism.
92) The main source of capital from within the firm is ________.
93) ________ is pricing that is established for transfers between members of the enterprise.
Version 1 22
94) ________ is holding assets in one market to offset price changes to exposure in another
market.
95) Collecting receivables early when currencies are expected to weaken is an example of
________.
96) Collecting receivables late when a currency is expected to strengthen is an example of
________.
97) A ________ loan, made through an intermediary, usually a bank, can be used when the
host country has currency exchange restrictions.
98) ________ are payments made for the use of a company’s name, trade name, consulting,
and technology.
99) ________ is taking a position in one market to offset exposure to price changes in
another market.
100) ________ exposure occurs when there is a time lag between when a transaction takes
place in a foreign currency and when payment is made.
101) In a ________, the company sells forward its foreign currency receivables for its home
currency, matching the forward date with the due date of the receivable.
102) ________ contracts are agreements to exchange currencies at specified times and rates.
Version 1 23
103) Exposure at the operations level caused by FX changes on projected cash flows is known
as ________ exposure.
104) ________ tax is an indirect tax levied on added value to the product.
105) A ________ is an extension of the parent company, not a separate legal entity.
106) A ________ is a separate legal entity owned by the parent company.
107) The ________ tax is an indirect tax paid by the payor, usually on passive income.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
108) Compare and contrast the current rate method and temporal method of foreign currency
consolidation.
109) Discuss the benefits and limitations of triple-bottom-line accounting.
110) Discuss the benefits a company has from using leading and lagging strategies.
Version 1 24
111) Discuss the risks associated with transaction exposure and how to hedge them.
112) Discuss the risks associated with translation exposure and how to hedge them.
Version 1 25
Answer Key
Test name: Module 15
Version 1 26
Version 1 27
Version 1 28
Version 1 29
Version 1 30
Version 1 31
Version 1 32
Version 1 33