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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › When to divide or multiply foreign exchange rate?
Hi,
I posted my reply to help other students. Can you help to check if my reply is correct and also to confirm if my understanding is right or wrong?
My reply is as below:
First situation:
If the receipt is $5000 and the exchange rate is $/euro 1.5000, then you DIVIDE. You will get 3333.33 euros.
This is because one euro gets you $1.5000. (3333.33 euros multiply $1.5000 will be equal to $5000).
Second situation:
If the receipt is $5000 and the exchange rate is euro/$ 1.5000, then you MULTIPLY. You will get 7500 euros.
This is because one $ will get you 1.5000 euros ($5000 multiply with 1.5000 euros will be equal to 7500 euros).
Conclusion:
The tips I used is to take note of the currency of payment or receipt (in this case is $), and also the exchange rate (which sign comes first). If the currency of payment or receipt do not match the first sign that comes first, you multiply. If it matches, then you divide.
Yes, that is correct 🙂
Great. Thank you 🙂
You are welcome 🙂