Answer:
d. Issuing paper receipts in excess of the amount of gold held.
Explanation:
Fractional-reserve banking is practiced by all commercial banks. Such banks involve banks that accept deposits from various customers and make loans to other borrowers while keeping an amount in reserve that is equal to a part of the deposit liabilities of the bank.
The fractional reserve system of banking started when goldsmiths began issuing paper receipts in excess of the amount of gold held.
Option d. is correct.
Your losses from a stolen ATM card are unlimited if you fail to report unauthorized use within 30 days after your statement is mailed to you.
a. True
b. False
g The comparative balance sheets for Pharoah Company show these changes in noncash current accounts: Accounts Receivable increased $29,800, Prepaid Expenses decreased $10,800, and Inventory decreased $18,900. Accounts payable increased $13,400. Calculate net cash provided by operating activities using the indirect method assuming that profit is $252,000 for the year ended June 30, 2021. Depreciation expense for the year was $26,900 and the company incurred a gain on sale of equipment of $21,000.
Jonathan was granted enough nonqualified stock options (NQSOs) to purchase 10,000 shares of Capital, Inc. stock at $10 per share two years ago. He exercised the options this year when Capital, Inc. stock was $25 per share. Three years later, Jonathan sells the 10,000 shares for $100 per share. Which of the following statements regarding the tax ramifications of Jonathan's transactions are CORRECT?
Capital gains tax is due the year the options are granted to Jonathan.
Jonathan's cost to exercise all of the NQSOs is $50,000.
Jonathan will have a $750,000 capital gain when he sells the stock at $100 per share.
Jonathan will have an additional $150,000 included in his W-2 compensation income, which is a type of ordinary income, subject to payroll taxes this year.
A) I, II, and III
B) III and IV
C) I and II
D) I, II, III, and IV
Answer: B. III and IV
Explanation:
Based on the information given, we should note that the capital gain will be:
= $1,000,000 - $250,000
= $750,000
Also, the bargain amount will be calculated as:
= 10000 × ($25 - $10)
= 10000 × $15
= $150,000
We should also note that the statement in option 1 that "Capital gains tax is due the year the options are granted to Jonathan" is wrong. Capital gain will only arise when the shares have been sold, therefore option I is incorrect.
Based on the information above, the answer is option III and IV.
The Friendly Sausage Factory (FSF) can produce hot dogs at a rate of 5,000 per day. FSF supplies hot dogs to local restaurants at a steady rate of 250 per day. The cost to prepare the equipment for producing hot dogs is $66. Annual holding costs are 45 cents per hot dog. The factory operates 300 days a year. Find
Answer: See explanation
Explanation:
The remainder of the question:
a). The optimal run size
b) The number of runs per year
c) The length (in days) of a run.
From the question,
p = 5000
u = 250 hotdogs per day
D = 250 × 300 = 75000 hotdogs/year
S = $66
H = 45 cents = $0.45
a. The optimal run size
= (✓2DS/✓H)(✓p/✓-✓u)
= (✓2×75000×66/✓0.45)(✓5000/✓4750)
= 4812
b) The number of runs per year
This will be:
= D/Q
= 75000/4812
= 15.59
= 16 runs per year
c) The length (in days) of a run.
This'll be:
= 4812/5000
= 0.96
= 1 day
Suppose you know a company's stock currently sells for $90 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share
Answer:
$ 3.87
Explanation:
It is given that :
Cost of the company's stock per share = $ 90
The required return on the stock is = 15 %
Therefore, the dividend yield = [tex]$\frac{9}{2}=4.5$[/tex]
We known that
[tex]$\frac{\text{dividend in one year}}{\text{current price}}=0.045$[/tex]
[tex]$D_1=0.045 \times 90$[/tex]
= 4.05
The current dividend is,
[tex]$D_0= \frac{4.05}{1.045}$[/tex]
= $ 3.87
Dog Bone Bakery, which bakes dog treats, makes a special biscuit for dogs. Each biscuit uses 0.75 cup of pure semolina flour. They buy 4,000 cups of flour at $0.55 per cup. They use 3,588 cups of flour to make 4,800 biscuits. The standard cost per cup of flour is $0.54. A. What are the direct materials price variance, the direct materials quantity variances, and the total direct materials cost variance
Answer:
Results are below.
Explanation:
To calculate the direct material rate and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (0.55 - 0.54)*4,000
Direct material price variance= $40 favorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (0.75*4,800 - 3,588)*0.55
Direct material quantity variance= $6.6 favorable
Finally, the total variance:
Total direct material variance= 40 + 6.6= $46.6 favorable
Assuming you are 22 and out of college, how many years do you anticipate working before you retire
Isaiah is a Financial Quantitative Analyst for a major stock investment company. What does Isaiah do on a daily basis as a part of his job?
He researches, analyzes, and summarizes information about fraud.
He assesses financial situations using mathematical models.
He analyzes tax information using mathematical formulas.
He manages the paperwork for buying and selling securities.
Answer:
He researches, analyzes, and summarizes information about fraud.
Answer:
A
Explanation:
He researches, analyzes, and summarizes information about fraud.
Arendelle Enterprises has inventory of $667,000 in its stores as of December 31. It also has two shipments in-transit that left the suppliers' warehouses by December 28. Both shipments are expected to arrive on January 5. The first shipment of $128,000 was sold f.o.b. destination and the second shipment of $80,000 was sold f.o.b. shipping point. What amount of inventory should Arendelle report on its balance sheet as of December 31
Answer:
$747,000
Explanation:
Calculation to determine What amount of inventory should Arendelle report on its balance sheet as of December 31
December 31 Inventory $667,000
Add Second shipment f.o.b. shipping point of $80,000
December 31 Inventory $747,000
($667,000+$80,000)
Therefore What amount of inventory should Arendelle report on its balance sheet as of December 31 is $747,000
LaMont works for a company in downtown Chicago. The company encourages employees to use public transportation (to save the environment) by providing them with transit passes at a cost of $290 per month. rev: 09_23_2020_QC_CS-230013a. If LaMont receives one pass (worth $290) each month, how much of this benefit must he include in his gross income each year
Answer:
The IRS sets the limit on transportation benefits provided by an employer, for 2021, this limit is $270 per month, or $3,240 per year.
The total benefit received by LaMont should = 12 x $290 = $3,480
This means that he must include $3,480 - $3,240 = $240 as part of his annual gross income.
Type the correct answer in the box. Spell all words correctly.
Being debt-free within the next 15 years is an example of which goal?
Being debt-free within 15 years is an example of a
goal.
Reset
Next
Answer:
Being debt-free within 15 years is an example of a long-term goal.
Explanation:
One main characteristic of a long-term goal is that it involves a planning horizon that is more than 5 years during which some thoughts are paid to the goal, and the means of achieving it are marshalled out, and rigorously pursued. Long-terms goals are best broken into manageable, short-term, and medium-term goals to enable the decision-maker to accomplish her goal. The future is always uncertain, to achieve a long-term goal you must remain motivated.
brendamunsamy00
Where u at
Answer:
Bombay
the company has a charged net income for a year and an earthquake
On January 1, 2011, The Miller Corporation purchased 300,000 shares of The Mayfair Corporation for $5.7 million. The investment represented 40% of The Mayfair Corporation's outstanding common shares. During 2011, Mayfair reported net earnings of $2.25 million and paid a cash dividend of $0.15 per share. During 2012, Mayfair reported a net loss of $180,000 and again paid a dividend of $0.15 per share. Calculate the book value of Miller's investment in Mayfair as of December 31, 2011, and December 31, 2012
Answer:
2011 Value of investment in Mayfair
= Beginning investment value + Portion of Mayfair net income - Portion of Mayfair dividends
= 5,700,000 + (40% * 2,250,000) - (300,000 shares * 0.15)
= $6,555,000
2012 Value of investment
= Beginning investment value + Portion of Mayfair net income - Portion of Mayfair dividends
= 6,555,000 + (40% * -180,000) - (300,000 * 0.15)
= $6,438,000
Earnings Per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Monarch Resources Inc. for December 31 of the current year: Common stock, $125 par value (no change during the year) $12,500,000 Preferred $6 stock, $90 par (no change during the year) 2,250,000 The net income was $1,300,000, and the declared dividends on the common stock were $460,000 for the current year. The market price of the common stock is $92 per share. For the common stock, determine (a) the earnings per share, (b) the price-earnings ratio, (c) the dividends per share, and (d) the dividend yield. Round to one decimal place except earnings per share and dividends per share, which should be rounded to the nearest cent. a. Earnings per share $fill in the blank 1 b. Price-earnings ratio fill in the blank 2 c. Dividends per share $fill in the blank 3 d. Dividend yield fill in the blank 4 %
Answer:
Monarch Resources Inc.
a. Earnings per share:
= $ 11.50
b. Price-earnings ratio:
= 8x
c. Dividends per share:
= $4.60 per share
d. Dividend yield:
= 5%
Explanation:
a) Data and Calculations:
Common stock, $125 par value = $12,500,000
Number of common stock shares = 100,000 ($12,500,000/$125)
$6 Preferred stock, $90 par value = $2,250,000
Number of preferred stock shares = 25,000 ($2,250,000/$90)
Net income = $1,300,000
Dividends on the Preferred stock = $150,000 ($2,250,000/$90 * $6)
Net income after preferred dividend = $1,150,000 ($1,300,000-$150,000)
Dividends on the Common stock = $460,000
Common stock market price = $92 per share
a. Earnings per share
= Net income after preferred dividend/number of shares
= $1,150,000/100,000
= $ 11.50
b. Price-earnings ratio:
= Market price/EPS
= $92/$11.50
= 8x
c. Dividends per share:
= Common stock dividends/number of common stock shares
= $460,000/100,000
= $4.60 per share
d. Dividend yield:
= Market price/Dividend per share
= $4.60/$92 * 100
= 5%
Corey is the city sales manager for RIBS, a national fast food franchise. Every working day, Corey drives his car as follows: Home to office Office to RIBS No. 1 RIBS No. 1 to No. 2 RIBS No. 2 to No. 3 RIBS No. 3 to home Miles 20 15 18 13 30 Corey renders an adequate accounting to his employer. As a result, Corey's reimbursable mileage is: a. O miles. b. 50 miles. C. 66 miles. d. 76 miles. e. None of these.
Answer: e. None of these
Explanation:
Based on the information given, Corey's reimbursable mileage will be:
= 15 miles + 18 miles + 13 miles
= 46 miles.
We should note that the mileage that she used for driving from her home to office and the one that she also used from driving from the last worksite to her home isn't deductible.
Since the answer of 46 miles isn't among the options given, then the answer is "None of these"
Problem 12-04A The income statement of Kingbird, Inc. is presented here. Kingbird, Inc. Income Statement For the Year Ended November 30, 2020 Sales revenue $7,465,900 Cost of goods sold Beginning inventory $1,868,500 Purchases 4,450,600 Goods available for sale 6,319,100 Ending inventory 1,331,800 Total cost of goods sold 4,987,300 Gross profit 2,478,600 Operating expenses 1,120,500 Net income $1,358,100 Additional information: 1. Accounts receivable increased $205,900 during the year, and inventory decreased $536,700. 2. Prepaid expenses increased $179,800 during the year. 3. Accounts payable to suppliers of merchandise decreased $345,700 during the year. 4. Accrued expenses payable decreased $105,800 during the year. 5. Operating expenses include depreciation expense of $95,300. Prepare the operating activities section of the statement of cash flows using the direct method
Answer:
Cash Flow From Operating Activities
Cash Receipt from Customers $7,260,000
Cash Paid to Suppliers and Employees ($6,294,700)
Cash Provided by Operating Activities $965,300
Explanation:
Step 1 : Cash Paid to Suppliers and Employees Calculation
Cost of goods sold $4,987,300
Add Operating expenses $1,120,500
Total $6,107,800
Adjustments :
Depreciation expense $95,300
Decrease in Inventory ($536,700)
Increase in Prepaid Expenses $179,800
Decrease in Accounts Payable $345,700
Decrease in Accrued Expense Payable $105,800
Cash Paid to Suppliers and Employees $6,294,700
Step 2 : Cash Receipt from Customers Calculation
Sales revenue $7,465,900
Less Increase in Accounts receivable ($205,900)
Cash Receipt from Customers $7,260,000
Swifty Company reports the following financial information before adjustments. Dr. Cr. Accounts Receivable $136,200 Allowance for Doubtful Accounts $3,670 Sales Revenue (all on credit) 813,600 Sales Returns and Allowances 54,790 Prepare the journal entry to record bad debt expense assuming Swifty Company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but Allowance for Doubtful Accounts had a $1,360 debit balance.
Answer:
(a) Debit Bad Debt Expense for $1,778; and Credit Allowance for Doubtful Accounts for $1,778.
(b) Debit Bad Debt Expense for $6,808; and Credit Allowance for Doubtful Accounts for $6,808.
Explanation:
(a) Company estimates bad debts at 4% of accounts receivable
Estimated bad debt = Accounts Receivable * 4% of accounts receivable = $136,200 * 4% = $5,448
Bad Debt Expense = Estimated bad debt - Allowance for Doubtful Accounts = $5,448 - $3,670 = 1,778
The journal entries will now look as follows:
Particulars Debit ($) Credit ($)
Bad Debt Expense 1,778
Allowance for Doubtful Accounts 1,778
(To record bad debt expense.)
(b) Company estimates bad debts at 4% of accounts receivable but Allowance for Doubtful Accounts had a $1,360 debit balance.
Bad debt expense = (Accounts Receivable * 4% of accounts receivable) + Allowance for Doubtful Accounts debit balance = ($136,200 * 4%) + $1,360 = $6,808
The journal entries will now look as follows:
Particulars Debit ($) Credit ($)
Bad Debt Expense 6,808
Allowance for Doubtful Accounts 6,808
(To record bad debt expense.)
Umbarra Company bonds have a stated coupon rate of 5% and pay interest on an annual basis. They mature in 18 years and have a par value of $1,000. The market rate of interest on similar debt is 8%. The value of Umbarra bonds is (round to the nearest dollar).
Answer:
Value of Bond =$718.8
Explanation:
The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV) discounted at the yield rate
Value of Bond = PV of interest + PV of RV
The PV of interest payment
A ×(1- (1+r)^(-n))/r
Interest payment = 5%× 1000 = 50
PV = 50× (1- 1.08^(-18))/0.08 = 468.59
PV of redemption value
PV = RV× (1+r)^(-n)
PV = 1000× 1.18^(-18) = 250.24
The value of bond = 468.59 + 250.24= 718.84
The value of Bond = $718.84
Each of the following is true except for: Multiple Choice a direct involuntary conversion occurs when property taken under eminent domain is replaced with other property. qualified replacement property rules are more restrictive than the like-kind property rules. an indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property. losses realized in involuntary conversions are deferred.
Answer: losses realized in involuntary conversions are deferred.
Explanation:
Based on the information given, we should note that every other options are true except the last option "losses realized in involuntary conversions are deferred".
Losses realized in the involuntary conversion are not deferred but they're are realized. Itbus the losses that are realized in the like-kind exchange that are being deferred.
Impact of Treasury Financing on Bond Prices The Treasury periodically issues new bonds to finance the deficit. Review recent issues of the Wall Street Journal or check related online news to find a recent article on such financing. Does the article suggest that financial markets are expecting upward pressure on interest rates as a result of the Treasury financing
Answer:
When the treasury bonds are restricted to purchase it creates pressure on other securities and interest rates tend to move upwards.
Explanation:
When interest rates more upwards then cost of borrowing is increased. This increase in cost of borrowing creates pressure on the profits of private sector. The public sector benefits from this increase in interest rates. When government is in trouble and financing is limited then these measures are used to run the economy.
Emilia bought some Japanese sushi at the grocery store for $14. When she got it home and served it to her family, it tasted rancid. She brought the sushi back the next day and was given a full refund with no questions asked. Evidence indicates that successful handling of product and service failures as in Emilia's situation leads to _______.
Answer:
higher levels of customer loyalty.
Explanation:
CRM is an acronym for customer relationship management and it typically involves the process of combining strategies, techniques, practices and technology so as to effectively and efficiently manage their customer data in order to improve and enhance customer satisfaction. Therefore, this employees are saddled with the responsibility of ensuring the customer are satisfied and happy with their service at all times.
CRM means collecting information about the customer for the purpose of improving their future experience.
In this scenario, Emilia bought some Japanese sushi at the grocery store for $14. When she got it home and served it to her family, it tasted rancid. She brought the sushi back the next day and was given a full refund with no questions asked.
This evidence indicates that successful handling of product and service failures as in Emilia's situation leads to higher levels of customer loyalty and as such they would stick to patronizing the business firm or service provider.
This ultimately implies that, in order to gain loyalty from your customers, it is very important and necessary that you treat them right, listen to their complaints, and resolve any business related issue because customers are always right.
Do internet search enhance our knowledge in animal/fish raising?
Pension data for the Ben Franklin Company include the following for the current calendar year: Discount rate, 10% Expected return on plan assets, 12% Actual return on plan assets, 11% Service cost, $270,000 January 1: PBO $ 1,470,000 ABO 1,070,000 Plan assets 1,570,000 Amortization of prior service cost 27,000 Amortization of net gain 4,700 December 31: Cash contributions to pension fund $ 227,000 Benefit payments to retirees 247,000 Required: 1. Determine pension expense for the year. 2. Prepare the journal entries to record pension expense and funding for the year.
Answer:
A. $250,900
B. Dr Pension expense $250,900
Dr Net gain–pensions $4,700
Cr Pension asset $228,600
Cr Prior service cost $27,000
Dr Pension asset $ 227,000
Cr Cash $ 227,000
Explanation:
A. Calculation to determine the pension expense for the year
Service cost $270,000
Add Interest cost (10% x $1,470,000) $147,000
Less Expected return ($188,400 )
(12%*1,570,000)
Add Amortization of prior service cost $27,000
)
Less Amortization of net gain($4,700)
Pension expense $250,900
Therefore pension expense for the year will be $250,900
B. Preparation of the journal entries to record pension expense and funding for the year)
Dr Pension expense $250,900
Dr Net gain–pensions $4,700
Cr Pension asset ($270,000 + 147,000 – $188,400) $228,600
Cr Prior service cost $27,000
Dr Pension asset $ 227,000
Cr Cash $ 227,000
A company decides to let go of some employees due to a financial crisis. Irena loses her job, while her colleagues with similar performance ratings and productivity retain their jobs. Irena's judgment of her loss when compared to her colleagues' is a perception of
Answer:
The correct answer is "Procedural unfairness".
Explanation:
A basis for a respondent to challenge constitutional amendments for setting aside legal procedures throughout family legal proceedings will be found procedurally unfair.Throughout the event that a participant challenges a court decision, as well as a basis for the appeal, involves procedural injustice throughout a community court appearance, the privy council should first address the procedural fairness issue.Bankruptcy, Chapter 7. Gigantic Furniture is having its annual "Going Out of Business Sale." If Gigantic Furniture is filing under Chapter 7, will it be back next year for another going out of business sale? (Select the best response.) A. No, Chapter 7 bankruptcy is for the selling off of all the assets of the firm and ceasing all business operations. B. No, Chapter 7 bankruptcy is for restructuring the firm's debt and it does not allow to have more than one "Going Out of Business Sale." C. Yes, Chapter 7 bankruptcy is for restructuring the firm's debt and buying new inventory. D. Yes, Chapter 7 bankruptcy is for the selling off of all the assets of the firm and ceasing all business operations.
Answer:
A. No, Chapter 7 bankruptcy is for the selling off of all the assets of the firm and ceasing all business operations.
Explanation:
In the chapter of Bankruptcy, chapter 7, the firm Gigantic Furniture is going to have its annual " Going Out of Business Sale". Now if the Gigantic Furniture is filing under the Chapter 7, it will not be back for the next year for an another going out of the business sale because Gigantic Furniture is selling off all of its assets and ceasing all its business operations.
1.What is Barbara's net monthly income?
2.How much are Barbara’s regular monthly expenses?
3.How much does Barbara have left over after she pays her regular monthly expenses?
4.What are Barbara’s short term goals?
5.What is her long term (longer than 1 year) goal?
6.If the party Barbara is giving will cost $135, how much money will she have left over this month?
7.How much would Barbara have left over this month is she paid her regular expenses, saved for Christmas, and had a party for Sara?
8.How much do you think Barbara would need to put into savings every month to reach her long term goal?
Answer:
1. 389.60
2. 160 a month
3. 229.60
4. Party clothes, Saving for Christmas, and MP3 Repair
5. College
6. 94.60
Suppose Dr. Chu decided to open a donuts shop call Dr. Donuts. Dr. Chu is able to source flours at $2 per pound (making 40 donuts), sugars at $5 per pound (making 100 donuts), and butter at $1 per pound (making 100 donuts) While the donuts are not very tasty, Dr. Chu believes he can sell a lot of them by pricing them at $0.36 per donuts. Assuming his rent is $1800 per month, corporate tax of $100 per month, and draws a salary of $200 a day (use 30 days in a month), how many donuts must Dr. Chu sell in a month to break-even.
Answer:
31,600 donuts
Explanation:
Break even point is the level of activity where a company makes neither a profit nor a loss.
Break even point (units) = Fixed Costs ÷ Contribution per unit
where,
Contribution per unit = Sales per unit - Variable Costs per unit
Step 1 : Sales per donut
Sales per donut = $0.36
Step 2 : Variable Cost per Donut
Variable Cost per Donut :
Flours ($2 ÷ 40) $0.05
Sugars ($5 ÷ 100) $0.05
Butter ($1 ÷ 100) $0.01
Total $0.11
Step 3 : Fixed cost per month
Rent $1,800
corporate tax $100
Salary ($200 x 30) $6,000
Total $7,900
therefore,
Break even point = $7,900 ÷ ($0.36 - $0.11)
= 31,600 donuts
Conclusion :
Dr. Chu sell 31,600 donuts in a month to break-even.
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8.9%. Bond C pays a 10% annual coupon, while Bond Z is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 8.9% over the next 4 years, calculate the price of the bonds at each of the following years to maturity.
Years to Maturity Price of Bond C Price of Bond Z
4 $ $
3 $ $
2 $ $
1 $ $
0 $ $
Answer:
Years to maturity Price of Bond C Price of Bond Z
4 $1,084.42 $711.03
3 $1,065.93 $774.31
2 $1,045.80 $843.23
1 $1,023.88 $918.27
Explanation:
Note: See the attached excel for the calculations of the prices of Bond C and Bond Z.
The price of each bond of the bond can be calculated using the following excel function:
Bond price = -PV(rate, NPER, PMT, FV) ........... (1)
Where;
rate = Yield to maturity of each of the bonds
NPER = Years to maturity
PMT = Payment = Coupon rate * Face value
FV = Face value
Substituting all the relevant values into equation (1) for each of the Years to Maturity and inputting them into relevant cells in the attached excel sheet, we have:
Years to maturity Price of Bond C Price of Bond Z
4 $1,084.42 $711.03
3 $1,065.93 $774.31
2 $1,045.80 $843.23
1 $1,023.88 $918.27
Cincinnati t-shirts prints custom t-shirts. The cost to produce one shirt is: direct materials, $10; direct labor, $1.20; and manufacturing overhead $4.50. Cincinnati Children’s Hospital asked Cincinnati t-shirt to sell them custom t-shirts for $12 each for a local charity event. Direct material and direct labor are required for each t-shirt. Of the manufacturing overhead, $1.50 is variable and would be incurred on each additional unit. The remaining $3 in overhead is allocated fixed overhead that would not be increased or decreased by this order. What would be the effect on net income if they accept this special order and sell 200 shirts to Cincinnati Children’s Hospital for $12 each?
Answer:
Effect on income= $140 decrease
Explanation:
Giving the following formula:
Production costs:
Direct material= 10
Direct labor= 1.2
Variable overhead= $1.5
Selling price= $12
Number of units= 200
Because it is a special offer and there is unused capacity, we will not take into account the fixed costs.
Effect on income= Units sold*unitary contribution margin
Effect on income= 200*(12 - 10 - 1.2 - 1.5)
Effect on income= $140 decrease
A purely domestic firm that sources and sells only domestically, Multiple Choice should never hedge since this could actually increase its currency exposure. faces no exchange rate risk and should never hedge since this could actually increase its currency exposure. faces no exchange rate risk. faces exchange rate risk to the extent that it has international competitors in the domestic market.
Answer:
faces exchange rate risk to the extent that it has international competitors in the domestic market.
Explanation:
Exchange rate risk is defined as the risk that exists when a company engaged in transactions that are denominated in a foreign currency rather than the domestic currency.
So if a purely domestic firm that sources and sells only domestically has international competitors in its local market, and the exchange rate is favouring the competitors there will be a risk for them.
For example if international competitors can source raw materials cheaper because of the exchange rate of a foreign country, it will be a disadvantage to local firms that cannot reduce their prices.