Question

Olmsted Co. has small computer chips assembled in Poland and transports the final assembled products to the parent, where they are sold by the parent in the U.S. The assembled products are invoiced in dollars. It uses Polish currency (the zloty) to produce these chips, and assemble them in Poland. The Polish subsidiary pays the employees in the local currency (zloty). Olmsted Co. finances its subsidiary operations with loans from a Polish bank (in zloty). The parent of Olmsted will send sufficient monthly payments (in dollars) to the subsidiary in order to repay the loan and other expenses incurred by the subsidiary. If the Polish zloty depreciates against the dollar over time, will that have a favorable, unfavorable, or neutral effect on the value of Olmsted Co.? Briefly explain.

Answer 1

Answer:

The solution to this question can be defined as follows:

Explanation:

In the given question, it would make a good impact, because Olmsted incumbent on zloty expenses, and in this condition will be used to cover such all costs, that is much less in dollars unless the zloty becomes reduced. They can also reimburse that zloty loan with much less dollar unless the zloty starts going down.