Functional Currency: Definition & Examples


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question 1 of 3

1) Functional currency is the _____ economic environment in which the entity operates.

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1. Why is it important to choose the proper functional currency?

2. All of the following are factors that affect the choice of functional currency except _____.

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About This Quiz & Worksheet

Find out how much you know about functional currency with these quiz questions. Topics include the definition of functional currency and the selection of a proper functional currency.

Quiz & Worksheet Goals

You'll be quizzed on these areas of study:

  • Factors that influence the choice of functional currency
  • Mistake regarding the use of a local currency
  • Where gain/loss is included when a foreign subsidiary's local currency is the functional currency

Skills Practiced

  • Reading comprehension - ensure that you draw the most important information from the related lesson on functional currency
  • Information recall - access the knowledge you've gained regarding why it's important to choose a proper functional currency
  • Knowledge application - use your knowledge to answer questions about factors influencing functional currency choices

Additional Learning

To learn more, consider the accompanying lesson called Functional Currency: Definition & Examples. You'll be going over these areas of interest:

  • Multinational companies that use functional currency
  • Functional currency examples
  • What can happen if an incorrect functional currency is chosen