Most businesses maintain positive net working capital, so a foreign currency appreciation is more likely to be associated with a translation gain than a translation loss.

Question

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If a business maintains a positive net working capital, it means that they have more current assets than current liabilities. This indicates that the business has enough short-term assets to cover its short-term obligations. Therefore, if a foreign currency appreciation occurs, it would result in an increase in the value of the current assets in the foreign currency, which would lead to a translation gain. However, if the business has negative working capital or a significant amount of short-term debt, a foreign currency appreciation could result in a translation loss.

Most Businesses Maintain Positive Net Working Capital, So a Foreign