translation

Examples of translation in the following topics:

• Types of Exchange Exposure: Short-Run, Long-Run, and Translation

  • Foreign currency exposures are categorized as transaction/ short-run exposure, economic/ long-run exposure, and translation exposure.
  • Foreign currency exposures are generally categorized into the following three distinct types: transaction (short-run) exposure, economic (long-run) exposure, and translation exposure.
  • A firm's translation exposure is the extent to which its financial reporting is affected by exchange rate movements.
  • While translation exposure may not affect a firm's cash flows, it could have a significant impact on a firm's reported earnings and therefore its stock price.
  • Translation exposure is distinguished from transaction risk as a result of income and losses from various types of risk having different accounting treatments.

• Temporal Classification

  • A method of foreign currency translation that uses exchange rates based on the time assetsand liabilities are acquired or incurred, is required.
  • The gains and losses that result from translation are placed directly into the current consolidated income.

• Exposure Types

  • We define these gains or losses as transaction exposure, economic exposure, translation exposure, and tax exposure.
  • Unfortunately, the translation and tax exposures are beyond the scope of this book.
  • Translation exposure, referred to as accounting exposure, is fluctuations in currency exchange rates affect a firm's consolidated statements.
  • On the other hand, translation exposures are not related to cash flows and do not reduce taxable income.

• Defining Operating Leverage

  • Operating leverage is a measure of how revenue growth translates into growth in operating income.
  • Operating leverage is also a measure of how revenue growth translates into growth in operating income.

• Other Comprehensive Income

  • Gains and losses resulting from the translation of the financial statements of foreign subsidiaries from the foreign currency to the reporting currency

• Claim to Income

  • This translates to a return on investment to shareholders.

• Answers to Chapter 19 Questions

  • Translation exposure is the change in a company's consolidated financial statements because accountants use different exchange rates to convert accounts into the domestic currency.

• Strategic Planning

  • In other words, financial modelling is about translating a set of hypotheses about the behavior of markets or agents into numerical predictions; for example, a firm's decisions about investments or investment returns.

• Discounted Cash Flow Approach

  • Translate future projected cash flows into present day dollars, incorporating risk and the time value of money

• Reporting of Financial Statement Analysis

  • In order to ensure uniformity, which aids in the effective translation of information to shareholders regarding different businesses and different industries, financial statements must be prepared and reported using certain guidelines and procedures.