If the British subsidiary of a European firm has net exposed assets of £250,000, and the pound drops in value from euro 1.40/£ to euro 1.30/£, the European firm has a translation ________.

Question

Quizplus · Accepted Answer

The translation gain is calculated as the change in the exchange rate multiplied by the net exposed assets. In this case, the change in the exchange rate is euro 0.10 (1.40 - 1.30), and the net exposed assets are £250,000. Therefore, the translation gain is euro 0.10 * £250,000 = euro 25,000.

If the British Subsidiary of a European Firm Has Net