Springfield Co.,based in the U.S.,has a cost of goods sold attributable to foreign material orders that exceeds its foreign revenue. All foreign transactions are denominated in the foreign currency of concern. This firm would _______ a stronger dollar and would _______ a weaker dollar.

Question

Springfield Co.,based in the U.S.,has a cost of goods sold attributable to foreign material orders that exceeds its foreign revenue.  All foreign transactions are denominated in the foreign currency of concern.  This firm would _______ a stronger dollar and would _______ a weaker dollar.

Quizplus · Accepted Answer

Since the cost of goods sold attributable to foreign material orders exceeds foreign revenue, a stronger dollar would decrease the cost of goods sold and lead to a higher profit margin for the Springfield Co. On the other hand, a weaker dollar would increase the cost of goods sold and lower the profit margin. Therefore, the Springfield Co. would benefit from a stronger dollar and be adversely affected by a weaker dollar.