Hi guys this is a MC question for 2021 KNOX grammar trials that I am having trouble with.
Could someone please do the question and justify the reasoning to me?
The solution doesn't make sense to me lmao.
View attachment 43555
Hi guys this is a MC question for 2021 KNOX grammar trials that I am having trouble with.
Could someone please do the question and justify the reasoning to me?
The solution doesn't make sense to me lmao.
View attachment 43555
It’s A
The formula for Net Foreign Liabilities is
Net Foreign Liabilities (NFL) = Net Foreign Equity (NFE) + Net Foreign Debt (NFD)
The question states that NFD > NFL
Since we know NFD plus NDE = NFL then the only way for NFD to be greater than NFL is for NFE to be negative. I’ll use actual numbers to clarify this.
Take for example, NFD equals 600. NFE equals -200
Subbing into above Formula
NFD + NFE = NFL
600 + (-200) = NFL
400 = NFL
As shown NFL (which is 400) is smaller than NFD (600)
The only that this could occur is for NFE to be negative ( -200)
We must now choose the option that would result in NFE being negative. This is A because when debits (outflows) are higher than credits (inflows), then there will be net negative equity as more is going out then coming in.
Hope this helps!
