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Which of the following is NOT true? If a firm does not have foreign subsidiaries, it is not subject to translation exposure. Genetech Inc. (a
Which of the following is NOT true? |
If a firm does not have foreign subsidiaries, it is not subject to translation exposure. Genetech Inc. (a U.S. based firm) has a fully owned subsidiary in Germany that generates substantial earnings in Germany. The German subsidiary never remits earnings but reinvests them in Germany. Consequently, Genetech is not exposed to translation exposure. Translation exposure refers to accounting exposure. Translation exposure refers to the effect that an unanticipated change in exchange rates will have on the consolidated financial reports of an MNC.
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