FSA : Multinational Operations This is Question 21 for those who have the book Rates in LC/USD: --------------------- 2004 2005 2006 2007 Avg. 0.90 1.05 1.05 1.25 Year End 1.00 1.10 1.00 1.50 Given 2007 Financials in Local Currency (LC) cash & rec. 120m Inventory 360m Equipment 1092m Liabilities 600m Capital Stock 350m Retained Earn. 622m at the end of 2007 , the retained earnings account was equal to USD 525m and to date no dividends have been paid. All capital stock was issued end 2004. Calculate the cumulative translation adjustment (all-current method)… the answer is given as: [(120 million cash and receivables + 360 million inventory + 1,092 million equipment – 600 million liabilities) / 1.50] – $350 million capital stock – $525 retained earnings = –$227 million. Since the CTA is negative, it would have a debit balance. Can someone explain this answer. The CTA as I know has 2 components … Holding effect and flow effect… I can see part of the holding effect but what about the flow effect?? Another question: Is PVGO calculated using market prices?? or after deriving the price using fundamentals? They used market price in the Afternoon Exam 1 answer… why???
I got 17 out of the first 18 right on that test. When I got to the item set you mention (and the two items sets afterwards), that’s when I decided to ignore Volume 2. Every question seems to have about 7 different adjustments you need to make before solving the answer. Even after reading the answers that Schweser gave, I still had no idea what they were talking about. Not worth your time.
Good to know, I just stumbled on this item set as well and can’t make sense of the answer. I’m getting the impression that with the exception of the actual 2006 exam, book 7 is a waste of time? The last thing I need to do is squash my confidence going into the test. Am I better off doing QBank questions (all advanced)?
i don’t know how to answer … i’m getting all the practise i can get my hands on! i’ll prob finish book 7 by tomorrow evening. it’s ok if i get a couple of questions i don’t understand… after all i KNOW i’m not getting anything beyond 80(which i haven’t gotten on any of the book 6 exams even). i think advanced tests are actually not so advanced after all … many questions seem to be getting u ready to the vignette format and don’t really attempt to “pick ur brain” (as my manager likes to say)… good luck to u guys… anyway… if anyone can answer me i’ll appreciate it!