Rockford Co. is a U.S. manufacturing firm that produces goods in the U.S. and sells all products to retail stores in the U.K.; the goods are denominated in pounds. It finances a small portion of its business with pound-denominated loans from British banks. Which of the following is true? (Assume that the amount of products to be sold is guaranteed by contracts.)

Question

Quizplus · Accepted Answer

The dollar value of sales is lower if the pound depreciates against the dollar, as the revenue in pounds will convert to fewer dollars.