Question: A U.S.based MNC's consolidated earnings is concerned that it will be adversely affected by depreciation of foreign currencies used by its subsidiaries. Why is this

A U.S.based MNC's consolidated earnings is concerned that it will be adversely affected by depreciation of foreign currencies used by its subsidiaries. Why is this a translation risk for this MNC?

  1. Foreign earnings may be measured incorrectly.
  2. Foreign earnings are translated at the average exchange rate over the fiscal year.
  3. Foreign earnings may not be convertible to the home currency.

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