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Company X is a U

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Company X is a U.S.-based IT company with operations and earnings in a number of foreign countries. The company's profits by subsidiary, in local currency (in millions), are shown in the following table for 2019 and 2020.

 

     Net Income           Japanese Subsidiary       Britih Subsidiary

2019                   JPY 200                            GBP 100.00

2020                   JPY 1,480                         GBP 108.40

 

 

The average exchange rate for each year, by currency pairs, is the following.

Exchange Rate      JPY = 1 USD                 USD = 1 GBP

      2019                     97.57                               1.5646

      2020                      90.88                               1.6473

 

Use the above data, Students answer the following questions.

1. What is Company X's consolidated profits in U.S. dollars in 2019 and 2020?

  

2. If the same exchange rates are used for both years, what is the change in corporate earnings on a "constant currency" basis?   

Using the results of the constant currency analysis in part b, is it possible to separate Company X's growth in earnings between local currency earnings and foreign exchange rate impacts on a consolidated basis?