Carrefour S$.$A$.$ is a global retailer headquartered in France. Carrefour has a subsidiary in Hong Kong, Carrefour Global Sourcing Asia Ltd$.,$ which operates retail stores in Asia. Assume that Carrefour Global Sourcing Asia Ltd$.$ has a positive equity balance, and its monetary assets exceed its monetary liabilities. The euro has steadily strengthened against the Hong Kong dollar in the past few years.$$

Required$$

a$.$ Consider these two net income numbers for Carrefour Global Sourcing Asia: net income remeasured from Hong Kong dollars into euros, and net income translated from Hong Kong dollars into euros.$$Which is larger? Explain your answer.$$

Which of the two net income numbers is larger?

Answer $1$Remeasured incomeTranslated income

Select the reason as to why this income would be higher?

The direct exchange rate has been steadily rising which means remeasured expenses are more than translated expenses since historical rates are higher than average rates.$$

The direct exchange rate has been steadily rising which means remeasured expenses are less than translated expenses since historical rates are lower than average rates.$$

The direct exchange rate has been steadily falling which means remeasured expenses are more than translated expenses since historical rates are higher than average rates.$$

The direct exchange rate has been steadily falling which means remeasured expenses are less than translated expenses since historical rates are lower than average rates.

b$.$ Repeat the requirements of a$.$ for Carrefour Global Sourcing Asia$$s return on assets.$$

Which ROA is higher?

Answer $3$Remeasured ROATranslated ROA

Select the reason as to why this ROA would be higher?

Remeasured assets are higher than translated assets since historical rates are higher than the current rate.$$ From part a$.,$ remeasured income is lower than translated income.$$

Remeasured assets are higher than translated assets since historical rates are higher than the current rate.$$ From part a$.,$ translated income is lower than remeasured income.$$

Translated assets are higher than remeasured assets since historical rates are lower than the current rate.$$ From part a$.,$ translated income is lower than remeasured income.$$

Translated assets are higher than remeasured assets since historical rates are higher than the current rate.$$ From part a$.,$ remeasured income is lower than translated income.$$

c$.$ Repeat the requirements of a$.$ for Carrefour Global Sourcing Asia$$s current ratio and debt to assets ratio.

Which current ratio is higher?

Answer $5$Remeasured current ratioTranslated current ratio

Select the reason as to why this debt to assets ratio would be higher?

Translated current assets may be slightly higher than remeasured current assets, as inventories and possibly prepaids are translated at a higher current rate. Current liabilities are likely to be the same under both methods.$$

Remeasured current assets may be slightly lower than translated current assets, as inventories and possibly prepaids are remeasured at lower historical rates.$$ Current liabilities are likely to be the same under both methods.$$

Translated current assets may be slightly lower than remeasured current assets, as inventories and possibly prepaids are translated at a lower current rate. Current liabilities are likely to be the same under both methods.$$

Remeasured current assets may be slightly higher than translated current assets, as inventories and possibly prepaids are remeasured at higher historical rates.$$ Current liabilities are likely to be the same under both methods.$$

Which debt to assets ratio is higher?

Answer $7$Remeasured debt to assets ratioTranslated debt to assets ratio

Select the reason as to why this debt to assets ratio would be higher?

Remeasured and translated debt should be the same. Translated total assets are higher than remeasured total assets since the older noncurrent assets are translated at a higher current rate.$$

Remeasured and translated debt should be the same. Remeasured total assets are higher than translated total assets since the older noncurrent assets are remeasured at higher historical rates.$$

Remeasured and translated debt should be the same. Translated total assets are lower than remeasured total assets since the older noncurrent assets are translated at a higher current rate.$$

Remeasured and translated debt should be the same. Remeasured total assets are lower than translated total assets since the older noncurrent assets are remeasured at lower historical rates.$$