An American corporation making purchases from foreign companies will experience gains and losses from exchange rate fluctuations if (A)the purchase prices are stated in terms of the foreign currency and (B)the purchases are made on account.

Question

Quizplus · Accepted Answer

If the purchase prices are stated in terms of the foreign currency, the American corporation will be affected by exchange rate fluctuations. If the purchases are made in cash, the corporation will not experience losses or gains due to exchange rate fluctuations, but if purchases are made on account, they will.

An American Corporation Making Purchases from Foreign Companies Will Experience