Which of the following are issues to address when analyzing foreign companies?
I.Making forecasts in foreign and domestic currencies.
II.Estimating the cost of capital in a foreign currency.
III.Incorporating foreign-currency risk in valuations.
IV.Using translated foreign-currency financial statements.

Question

Quizplus · Accepted Answer

When analyzing foreign companies, it is important to address all of the listed issues. Making forecasts in both foreign and domestic currencies is important to understand the potential impact of currency fluctuations. Estimating the cost of capital in a foreign currency is necessary to properly value the company. Incorporating foreign-currency risk in valuations is important to properly assess the potential risks and returns of investing in the company. Finally, using translated foreign-currency financial statements is necessary to understand the financial position and performance of the company.

Which of the Following Are Issues to Address When Analyzing