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Explanation:
Armada is a US-based company, which means its base or reporting currency is the US Dollar (USD). It generates its revenue in Germany, denominated in Euros (EUR). When Armada repatriates or translates its Euro-denominated sales back into US Dollars, the exchange rate will directly impact its reported revenue. If the US Dollar strengthens against the Euro, one Euro will buy fewer US Dollars. Consequently, the translated revenue of Armada in US Dollars will fall. Therefore, Option B is correct.
Q.13 Armada is an American tech company that manufactures internet routers with artificial intelligence. These routers can automatically connect to the employees of certain organizations without password verification. Armada sells its products worldwide, but its largest market is Germany, and its sales are denominated in Euros. Which of the following options is correct?
A
If the US dollar strengthens, the revenue of Armada will rise.
B
If the US dollar strengthens, the revenue of Armada will fall.
C
If the US dollar weakens, the revenue of Armada will fall.
D
The revenue of Armada will remain unaffected as the sales are denominated in Euros.
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