A foreign subsidiary with more revenue than expenses denominated in a foreign currency will be favorably affected by appreciation of the foreign currency.

Question

Quizplus · Accepted Answer

When a foreign subsidiary has more revenue than expenses denominated in a foreign currency, it means that the subsidiary is generating profit in that currency. If the currency appreciates, the value of the subsidiary's revenue in the parent company's currency (typically the reporting currency) will increase, resulting in higher profitability for the subsidiary and a higher value of the subsidiary in the parent company's financial statements. Thus, appreciation of the foreign currency will have a favorable impact on the subsidiary.

A Foreign Subsidiary with More Revenue Than Expenses Denominated in a Foreign