Question

Which of the following is false? The competitive effect is defined as a given operating cash flow in a foreign currency will be converted into a lower dollar amount after a currency depreciation. The competitive effect is that a depreciation may affect operating cash flow in the foreign currency by altering the firm's competitive position in the marketplace. The conversion effect is defined as a given operating cash flow in a foreign currency will be converted into a lower dollar amount after a currency depreciation.

1) The competitive effect is defined as a given operating cash flow in a foreign currency will be converted into a lower dollar amount after a currency depreciation.
2) The competitive effect is that a depreciation may affect operating cash flow in the foreign currency by altering the firm's competitive position in the marketplace.
3) The conversion effect is defined as a given operating cash flow in a foreign currency will be converted into a lower dollar amount after a currency depreciation.
4) None of the options

Answer 1

The false statement is that the conversion effect is defined as a given operating cash flow in a foreign currency will be converted into a lower dollar amount after a currency depreciation.

Step-by-step explanation:

Out of the given options, the false statement is:

1. The conversion effect is defined as a given operating cash flow in a foreign currency will be converted into a lower dollar amount after a currency depreciation.

The correct statements are:

1. The competitive effect is defined as a given operating cash flow in a foreign currency will be converted into a lower dollar amount after a currency depreciation.
2. The competitive effect is that a depreciation may affect operating cash flow in the foreign currency by altering the firm's competitive position in the marketplace.

The competitive effect refers to the decrease in the value of operating cash flow in a foreign currency when the domestic currency depreciates. This means that if a currency depreciates, the foreign currency will be converted into a lower dollar amount when calculating the operating cash flow. This can impact a firm's competitive position as it may result in higher costs for the firm's products or services compared to competitors who operate in countries with a stronger currency.