The U.S. dollar has been steadily strengthening with respect to the Singapore dollar. A U.S. parent has a Singapore subsidiary. Which statement is most likely to be true concerning the subsidiary's operating profit (excluding remeasurement gain or loss) as a percentage of average assets?
(Use T to represent translated leverage, R to represent remeasured leverage, and L to represent leverage calculated using local currency balances.)

Question

Quizplus · Accepted Answer

L = T > RWhen the U.S. dollar strengthens against the Singapore dollar, the operating profit as a percentage of average assets (a measure of profitability) when calculated in local currency (L) or translated (T) remains the same because the operational performance is not directly affected by exchange rate movements. However, remeasured (R) profitability may decrease because the value of assets and profits in Singapore dollars converts to fewer U.S. dollars, reducing the apparent profitability when remeasured into the parent's currency.

The US Dollar Has Been Steadily Strengthening with Respect to the the Singapore