Question #33

Reading: Reading 10 Multinational Operations

PDF File: Reading 10 Multinational Operations.pdf

Page: 18

Status: Correct

Correct Answer: B

Part of Context Group: Q33-34 First in Group
Shared Context
- If Capriati uses the current rate method to translate Navratov's income statement, the net profit margin will be: A) 11.7%. B) 8.6%. C) 10.1%.
Question
What is the difference in the translated receivables turnover ratio for Navratov Corp. between the temporal and current rate methods? The receivables turnover rate is:
Answer Choices:
A. the same under both methods
B. higher under the current rate method by 0.36x
C. lower under the current rate method by 0.30x
Explanation
The receivables turnover ratio is calculated as (sales / receivables). Under the both the current rate 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.
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