Asked by Baily Shelor on Jun 11, 2024
Verified
Which of the following statements is correct?
A) In Canada, the cost of a unit of foreign currency in Canadian dollars is a direct quotation, while the cost in that foreign currency of purchasing one Canadian dollar is referred to as an indirect quotation.
B) In Canada, the cost of a unit of foreign currency in Canadian dollars is an indirect quotation, while the cost in that foreign currency of purchasing one Canadian dollar is referred to as a direct quotation.
C) In Canada, the cost of a unit of foreign currency in Canadian dollars is a direct quotation, and the cost in that foreign currency of purchasing one Canadian dollar is also referred to as a direct quotation.
D) In Canada, the cost of a unit of foreign currency in Canadian dollars is an indirect quotation, while the cost in that foreign currency of purchasing one Canadian dollar is also referred to as an indirect quotation.
Direct Quotation
A foreign exchange rate quoted as the domestic currency per unit of the foreign currency.
Indirect Quotation
A method of quoting exchange rates in terms of how much foreign currency can be exchanged for a unit of domestic currency.
Foreign Currency
The currency used in a country other than the one where a company or individual is located, impacting financial transactions and reports when exchanged.
- Understand the implications of different exchange rate quotations (direct and indirect) in financial reporting.
Verified Answer
AP
Aditya PandeyJun 17, 2024
Final Answer :
A
Explanation :
In Canada, the cost of a unit of foreign currency in Canadian dollars is a direct quotation. This means that the cost is quoted in terms of the number of Canadian dollars required to purchase one unit of foreign currency.
On the other hand, the cost in that foreign currency of purchasing one Canadian dollar is referred to as an indirect quotation. This means that the cost is quoted in terms of the amount of foreign currency required to purchase one Canadian dollar.
Therefore, option A is the correct statement.
On the other hand, the cost in that foreign currency of purchasing one Canadian dollar is referred to as an indirect quotation. This means that the cost is quoted in terms of the amount of foreign currency required to purchase one Canadian dollar.
Therefore, option A is the correct statement.
Learning Objectives
- Understand the implications of different exchange rate quotations (direct and indirect) in financial reporting.