If the British subsidiary of a European firm has net exposed assets of £125,000,and the pound increases in value from €1.40/£ to €1.44/£,the European firm has a translation:

Question

Quizplus · Accepted Answer

When the pound increases in value from €1.40/£ to €1.44/£, the European firm will need fewer euros to purchase pounds. This means that the euro is stronger and the pound is weaker. As a result, the net exposed assets of the UK subsidiary will be worth less in euros when translated back into the European firm's reporting currency. This will result in a loss for the firm, which is equal to €5,000 (125,000 x 0.04).

If the British Subsidiary of a European Firm Has Net