A foreign subsidiary with more susceptible expenses than revenue to exchange rate movements will be favorably affected by an appreciation of the foreign currency.

Question

Quizplus · Accepted Answer

A foreign subsidiary with more susceptible expenses than revenue to exchange rate movements would actually be negatively affected by an appreciation of the foreign currency. This is because the expenses of the subsidiary (in the local currency) would increase while revenues (also in the local currency) would remain the same, resulting in lower profitability.

A Foreign Subsidiary with More Susceptible Expenses Than Revenue to Exchange