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答案和详解如下：

Q8. Which statements best define the impact of exchange rate changes on financial statements? Flow effects refer to the impact of:

A)   changes in the exchange rate on income statement items such as revenue. Holding effects are the impact of changes in the exchange rate on assets and liabilities on the balance sheet, such as cash balances.

B)   exchange rate changes on variables such as revenues. Holding effects refer to the impact of exchange rate changes on stock variables such as dividends.

C)   exchange rate changes on stock variables such as cash. Holding effects refer to the impact of exchange rate changes on variables such as revenue.

Correct answer is A)

Flow effects refer to the impact of exchange rate changes on flow variables such as revenue, while holding affects refer to the impact of exchange rate changes stock variables such as cash.

Q9. Flow effects refer to the impact of changes in exchange rates on which of the following variables?

A)   Cash balances.

B)   Accounts payable.

C)   Revenue.

Correct answer is C)

Flow effects refer to the impact of changes in the exchange rates on flow variables such as revenue. Holding effects refer to the impact of exchange rates on assets and liabilities held, such as cash balances.

Q10. A Canadian firm owns a foreign subsidiary in the U.S. In 2002, sales were USD1,000,000 and the USD/CAD exchange rate

     was 0.6329. In 2003, sales were also USD1,000,000 but the exchange rate was 0.7484. What is the impact of the change in

     the value of the CAD on the parent company’s translated sales? Sales will:

A)   increase by 18%.

B)   decrease by 18%.

C)   decline by 15%.

Correct answer is C)

While sales were flat at USD 1,000,000 in local currency terms, after translation the parent firm would report sales of CAD 1,336,184 for 2003 (= USD 1,000,000 / 0.7484) versus sales of CAD 1,580,028 for 2002 (= USD 1,000,000 / 0.6329). The 15% sales decline reported by the Canadian firm (CAD 1,336,184 versus CAD 1,580,028) is a flow effect. Even though there was no sales growth in the subsidiary, the parent firm still shows a 15% decrease in revenues from the subsidiary due solely to exchange rate effects. Note that because the subsidiary sales are constant the total exchange rate effect can be measured as (0.6329 / 0.7484) − 1 = −0.15.

Q11. A U.S. firm owns a foreign subsidiary in France. In 2002, sales were EUR 1,000,000 and the USD/EUR exchange rate was

1.0620. In 2003, sales were EUR 1,100,000 and the exchange rate was 1.1417. What is the impact of the change in the value

of the USD on the parent company’s translated sales? Sales will:

A)   increase by 7.5%.

B)   decrease by 7.5%.

C)   increase by 18.25%.

Correct answer is A)

The increase in sales due to the appreciating EUR is measured as 7.5% [= (1.1417 / 1.0620) − 1]. Sales for the subsidiary rose 10% [= (1,100,000 / 1,000,000) – 1] in the local currency (EUR). After translation the parent firm will report sales of USD 1,062,000 (= EUR 1,000,000 × 1.0620) for 2002 and USD 1,255,870 (= EUR 1,100,000 × 1.1417) for 2003. Growth measured from the parent’s perspective indicates sales rose 18.25% [= (1,255,870 / 1,062,000) − 1]. The 18.25% increase can also be calculated as the product of one plus the growth rate in sales measured in the local currency and one plus the rate of appreciation in the foreign currency, minus one, or (1.10 × 1.075) − 1 = 0.1825. The increase in the EUR results in a flow effect.