Which of the following indicates that the functional currency of a foreign subsidiary is the US dollar? Group of answer choices

a) Cash flows of the foreign entity do not immediately affect the US parent's cash flow.

b) Financing is primarily denominated in foreign currencies.

c) Sales markets of the foreign entity are primarily in foreign countries.

d) The volume of intraentity transactions is high. Labor, materials, and other costs consist primarily of local costs to the foreign affiliate.

Question

Frances Knight

Business

19 June, 11:55

Which of the following indicates that the functional currency of a foreign subsidiary is the US dollar? Group of answer choices

a) Cash flows of the foreign entity do not immediately affect the US parent's cash flow.

b) Financing is primarily denominated in foreign currencies.

c) Sales markets of the foreign entity are primarily in foreign countries.

d) The volume of intraentity transactions is high. Labor, materials, and other costs consist primarily of local costs to the foreign affiliate.

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Answers (1)

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Liana Huerta · Answer 1

C) Sales markets of the foreign entity are primarily in foreign countries.

Explanation:

The US dollar is the most commonly used currency in the world, and most of foreign trade is carried out using the US dollar. If the foreign entity sells most of its production overseas (exports) then they will use the US dollar as their functional currency since all their exports will be valued in US dollars.