Q94. If Capriati uses the all-current method to translate Navratov’s income statement, the net profit margin will be:

A)   8.6%.

B)   10.1%.

C)   11.7%.

Q95. What is the difference in the translated receivables turnover ratio for Navratov Corp. between the temporal and all-current

     methods? The receivables turnover rate is:

A)   lower under the all-current method by 0.30x.

B)   the same under both methods.

C)   higher under the all-current method by 0.36x.

Q96. What is the difference in the total asset turnover ratio for Navratov Corp. between the temporal and all-current methods? The

     total asset turnover ratio is:

A)   higher under the all-current method.

B)   the same under both methods.

C)   lower under the all-current method.

答案和详解如下：

Q94. If Capriati uses the all-current method to translate Navratov’s income statement, the net profit margin will be:

A)   8.6%.

B)   10.1%.

C)   11.7%.

Correct answer is B)

The net profit margin is a pure income statement ratio, meaning it will be unaffected by the application of the all-current method. The calculation is shown below:

Under the all current method, all income statement accounts will be translated at the average rate.

Note that under the all-current method, since all income statement accounts are translated at the same average rate, you do not have to translate the income statement to get the correct answer. (750,000 / 7,400,000) = 10.1%.

Q95. What is the difference in the translated receivables turnover ratio for Navratov Corp. between the temporal and all-current

     methods? The receivables turnover rate is:

A)   lower under the all-current method by 0.30x.

B)   the same under both methods.

C)   higher under the all-current method by 0.36x.

Correct answer is B)

The receivables turnover ratio is calculated as (sales / receivables). Under the both the all-current and temporal methods, sales are translated at the average rate, while receivables are translated at the current rate. Since both the sales and receivables components are translated at the same rate, there will be no difference in the ratios between the two methods.

Q96. What is the difference in the total asset turnover ratio for Navratov Corp. between the temporal and all-current methods? The

     total asset turnover ratio is:

A)   higher under the all-current method.

B)   the same under both methods.

C)   lower under the all-current method.

Correct answer is A)

The total asset turnover ratio = (sales / total assets)

We can see from the exchange rates that the Russian ruble is depreciating (it takes fewer dollars to buy a ruble). With a depreciating local currency, sales are going to be the same under either method, since sales are translated at the average rate. Assets on the other hand will be higher under the temporal method, and lower under the all-current method. This is because all assets are translated at the current rate under the all-current method (which has the lower exchange rate), and at different rates under the temporal method (which is has fixed assets converted at the higher historical rate). With the same numerator and lower denominator, the all-current method will lead to the higher total asset turnover ratio.