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The Hi-Stakes Company has a number of importing and exporting transactions. Importing activities result in payables and exporting activities result in receivables. (LCU represents the
The Hi-Stakes Company has a number of importing and exporting transactions. Importing activities result in payables and exporting activities result in receivables. (LCU represents the local currency unit of the foreign entity.) Required: a. If the direct exchange rate increases, does the dollar weaken or strengthen relative to the other currency? If the indirect exchange rate increases, does the dollar weaken or strengthen relative to the other currency? Direct exchange rato Indirect exchange rate b. Indicate in the following table whether Hi-Stakes will have a foreign currency transaction gain, loss, or not be affected (NA) by changes in the direct or indirect exchange rates for each of the four situations presented. Direct exchange rate Increases Decreases Indirect exchange rate Increases Decreases Transaction Importing Importing Exporting Settlement currency Dollar LCU Dollar b. Indicate in the following table whether Hi-Stakes will have a foreign currency transaction gain, loss, or not be affected (NA) by changes in the direct or indirect exchange rates for each of the four situations presented. Transaction Importing Importing Exporting Exporting Direct exchange rate Indirect exchange rato Settlement currency Increases Decreases increases Decreases Dollar LCU Dollar LCU
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