Fundamentals of Multinational Finance

5th Edition Moffett Test Bank

Visit to download the full and correct content document: https://testbankdeal.com/dow
nload/fundamentals-of-multinational-finance-5th-edition-moffett-test-bank/
Fundamentals of Multinational Finance, 5e (Moffett et al.)
Chapter 10 Translation Exposure

Multiple Choice and True/False Questions

10.1 Overview of Translation

1) Translation exposure may also be called ________ exposure.

A) transaction
B) operating
C) accounting
D) currency
Answer: C
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition

2) Functional currency is
A) the currency of the primary economic environment in which the subsidiary operates and
generates cash flows.
B) the currency of the country where the corporation is incorporated.
C) the weighted average of the currencies of all foreign subsidiaries.
D) the currency proscribed by the national laws of the subsidiary's country of incorporation.
Answer: A
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition

3) ________ exposure is the potential for an increase or decrease in the parent company's net
worth and reported net income caused by a change in exchange rates since the last transaction.
A) Transaction
B) Operating
C) Currency
D) Translation
Answer: D
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition

1
Copyright © 2015 Pearson Education, Inc.
4) Translation exposure measures
A) changes in the value of outstanding financial obligations incurred prior to a change in
exchange rates.
B) the potential for an increase or decrease in the parent company's net worth and reported net
income caused by a change in exchange rates since the last consolidation of international
operations.
C) an unexpected change in exchange rates impact on short run expected cash flows.
D) none of the above.
Answer: B
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition

5) According to your authors, the main purpose of translation is

A) to prepare consolidated financial statements.
B) to help management assess the performance of foreign subsidiaries.
C) to act as an interpreter for managers without foreign language skills.
D) none of the above.
Answer: A
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition

6) A foreign subsidiary's ________ currency is the currency used in the firm's day-to-day
operations.
A) local
B) integrated
C) notational dollar
D) functional
Answer: D
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition

7) Exchange rate imbalances that are passed through the balance sheet affect a firm's reported
income, but imbalances transferred to the income statement do not.
Answer: FALSE
Diff: 1
Topic: 10.1 Overview of Translation
Skill: Recognition

2
Copyright © 2015 Pearson Education, Inc.
10.2 Translation Methods

1) Cumulative Translation Adjustment (CTA) is

A) a separate line on the consolidated income statement stating the FX effect on the company's
earnings.
B) a separate equity reserve account stating translation gains or losses over time.
C) a separate margin added to the sale price once the subsidiary is liquidated.
D) a separate account on the subsidiary cash flow statement that needs to be adjusted.
Answer: B
Diff: 2
Topic: 10.2 Translation Methods
Skill: Recognition

2) The biggest advantage of the current rate method of reporting translation adjustments is the
fact that the gain or loss goes directly to the reserve account on the consolidated balance sheet
and does not pass through the consolidated income statement.
Answer: TRUE
Diff: 1
Topic: 10.2 Translation Methods
Skill: Recognition

3) Under the current rate method, specific assets and liabilities are translated at exchange rates
consistent with the timing of the item's creation.
Answer: FALSE
Diff: 1
Topic: 10.2 Translation Methods
Skill: Recognition

4) Under the temporal rate method, specific assets and liabilities are translated at exchange rates
consistent with the timing of the item's creation.
Answer: TRUE
Diff: 1
Topic: 10.2 Translation Methods
Skill: Recognition

5) The basic advantage of the ________ method of foreign currency translation is that foreign
nonmonetary assets are carried at their original cost in the parent's consolidated statement while
the most important advantage of the ________ method is that the gain or loss from translation
does not pass through the income statement.
A) monetary; current rate
B) temporal; current rate
C) temporal; monetary
D) current rate; temporal
Answer: D
Diff: 1
Topic: 10.2 Translation Methods
Skill: Conceptual
3
Copyright © 2015 Pearson Education, Inc.
6) The current rate method of foreign currency translation gains or losses resulting from
remeasurement are carried directly to current consolidated income and thus introduces volatility
to consolidated earnings.
Answer: FALSE
Diff: 1
Topic: 10.2 Translation Methods
Skill: Recognition

7) The temporal method of foreign currency translation gains or losses resulting from
remeasurement are carried directly to current consolidated income and thus introduces volatility
to consolidated earnings.
Answer: TRUE
Diff: 1
Topic: 10.2 Translation Methods
Skill: Recognition

8) The two basic methods for the translation of foreign subsidiary financial statements are the
________ method and the ________ method.
A) current rate; temporal
B) temporal; proper timing
C) current rate; future rate
D) none of the above
Answer: A
Diff: 1
Topic: 10.2 Translation Methods
Skill: Recognition

9) If the same exchange rate were used to remeasure every line on a financial statement, then
there would be no imbalances from remeasuring.
Answer: TRUE
Diff: 1
Topic: 10.2 Translation Methods
Skill: Conceptual

10) Historical exchange rates may be used for ________, while current exchange rates may be
used for ________.
A) fixed asses and current assets; income and expense items
B) equity accounts and fixed assets; current assets and liabilities
C) current assets and liabilities; equity accounts and fixed assets
D) equity accounts and current liabilities; current assets and fixed assets
Answer: B
Diff: 1
Topic: 10.2 Translation Methods
Skill: Conceptual

4
Copyright © 2015 Pearson Education, Inc.
11) The current rate method is the most prevalent method today for the translation of financial
statements.
Answer: TRUE
Diff: 1
Topic: 10.2 Translation Methods
Skill: Recognition

12) The temporal rate method is the most prevalent method today for the translation of financial
statements.
Answer: FALSE
Diff: 1
Topic: 10.2 Translation Methods
Skill: Recognition

13) Gains or losses caused by translation adjustments when using the current rate method are
reported separately on the
A) consolidated statement of cash flow.
B) consolidated income statement.
C) consolidated balance sheet.
D) none of the above
Answer: C
Diff: 1
Topic: 10.2 Translation Methods
Skill: Recognition

5
Copyright © 2015 Pearson Education, Inc.
10.3 Trident Corporation's Translation Exposure

1) A Canadian subsidiary of a U.S. parent firm is instructed to bill an export to the parent in U.S.
dollars. The Canadian subsidiary records the accounts receivable in Canadian dollars and notes a
profit on the sale of goods. Later, when the U.S. parent pays the subsidiary the contracted U.S.
dollar amount, the Canadian dollar has appreciated 10% against the U.S. dollar. In this example,
the Canadian subsidiary will record a
A) 10% foreign exchange loss on the U.S. dollar accounts receivable.
B) 10% foreign exchange gain on the U.S. dollar accounts receivable.
C) since the Canadian firm is a U.S. subsidiary neither a gain nor loss will be recorded.
D) any gain or loss will be recorded only by the parent firm.
Answer: A
Diff: 1
Topic: 10.3 Trident Corporation's Translation Exposure
Skill: Conceptual

2) ________ gains and losses are "realized" whereas ________ gains and losses are only "paper."
A) Translation; transaction
B) Transaction; translation
C) Translation; operating
D) None of the above
Answer: B
Diff: 1
Topic: 10.3 Trident Corporation's Translation Exposure
Skill: Recognition

3) If the European subsidiary of a U.S. firm has net exposed assets of euro 500,000, and the euro
drops in value from $1.40/euro to $1.30/euro the U.S. firm has a translation
A) gain of $50,000.
B) loss of $50,000.
C) gain of $450,000.
D) loss of euro 450,000.
Answer: B
Diff: 2
Topic: 10.3 Trident Corporation's Translation Exposure
Skill: Analytical

4) If the European subsidiary of a U.S. firm has net exposed assets of euro 500,000, and the euro
increases in value from $1.30/euro to $1.35/euro the U.S. firm has a translation
A) gain of $25,000.
B) loss of $25,000.
C) gain of $525,000.
D) loss of euro 525,000.
Answer: A
Diff: 2
Topic: 10.3 Trident Corporation's Translation Exposure
Skill: Analytical
6
Copyright © 2015 Pearson Education, Inc.
5) If a European subsidiary of a U.S. firm has net exposed liabilities of euro 500,000, and the
euro drops in value from $1.40/euro to $1.30/euro then the U.S. firm has a translation
A) gain of $50,000.
B) loss of $50,000.
C) gain of $450,000.
D) loss of euro 450,000.
Answer: A
Diff: 2
Topic: 10.3 Trident Corporation's Translation Exposure
Skill: Analytical

6) If a European subsidiary of a U.S. firm has net exposed liabilities of euro 500,000, and the
euro increases in value from $1.30/euro to $1.35/euro then the U.S. firm has a translation
A) gain of $25,000.
B) loss of $25,000.
C) gain of $525,000.
D) loss of euro 525,000.
Answer: B
Diff: 2
Topic: 10.3 Trident Corporation's Translation Exposure
Skill: Analytical

10.4 Managing Translation Exposure

1) The main technique to minimize translation exposure is called a/an ________ hedge.
A) balance sheet
B) income statement
C) forward
D) translation
Answer: A
Diff: 1
Topic: 10.4 Managing Translation Exposure
Skill: Recognition

2) A balance sheet hedge is the main technique for managing

A) transaction.
B) operating.
C) translation.
D) money market.
Answer: C
Diff: 1
Topic: 10.4 Managing Translation Exposure
Skill: Recognition

7
Copyright © 2015 Pearson Education, Inc.
3) A balance sheet hedge requires that the amount of exposed foreign currency assets and
liabilities
A) have a 2:1 ratio of assets to liabilities.
B) have a 2:1 ratio of liabilities to assets.
C) have a 2:1 ratio of liabilities to equity.
D) be equal.
Answer: D
Diff: 1
Topic: 10.4 Managing Translation Exposure
Skill: Conceptual

4) Balance sheet hedge requires an equal amount of exposed foreign currency assets and
liabilities. A German company's subsidiary in Poland has Zloty as its functional currency. To
hedge its translational exposure the company should
A) issue 10 year Eurobond guaranteed by the parent matching the amount of subsidiary's assets.
B) obtain 5 year zloty loan in Poland.
C) start rolling over 1 year forward contracts.
D) start rolling over 3 month zloty loans, repatriate and convert the proceeds in euro.
Answer: D
Diff: 2
Topic: 10.4 Managing Translation Exposure
Skill: Conceptual

5) If a firm's balance sheet has an equal amount of exposed foreign currency assets and liabilities
and the firm translates by the temporal method, then
A) the net exposed position is called monetary balance.
B) the change of value of liabilities and assets due to a change in exchange rates will be of equal
but opposite direction.
C) both A and B are true.
D) none of the above.
Answer: C
Diff: 1
Topic: 10.4 Managing Translation Exposure
Skill: Conceptual

6) If a firm's subsidiary is using the local currency as the functional currency, which of the
following is NOT a circumstance that could justify the use of a balance sheet hedge?
A) The foreign subsidiary is about to be liquidated, so that the value of its Cumulative
Translation Adjustment (CTA) would be realized.
B) The firm has debt covenants or bank agreements that state the firm's debt/equity ratio will be
maintained within specific limits.
C) The foreign subsidiary is operating in a hyperinflationary environment.
D) All of the above are appropriate reasons to use a balance sheet hedge.
Answer: D
Diff: 1
Topic: 10.4 Managing Translation Exposure
Skill: Conceptual
8
Copyright © 2015 Pearson Education, Inc.
7) Using the table below, estimate the net exposure for Souris River Manufacturing of it's
wholly-owned Canadian subsidiary.

Souris River Manufacturing (Canada)

Balance Sheet December 31 200X

A) C$40,000
B) C$160,000
C) C$166,000
D) C$200,000
Answer: C
Diff: 2
Topic: 10.4 Managing Translation Exposure
Skill: Analytical

8) Balance sheet hedge is justified if

A) the management wants to boost the income statement metrics.
B) the foreign subsidiary country has high country risk and is facing potential hyperinflation.
C) the parent is planning equity injection to develop foreign subsidiary operations.
D) the subsidiary accounts receivable are denominated in parent's home currency.
Answer: B
Diff: 2
Topic: 10.4 Managing Translation Exposure
Skill: Conceptual

9) Most managers would prefer to be protected against transaction rather than translation losses
because
A) transaction loses are realized cash loses.
B) Wall-street analysts do not account for CTA.
C) potential transaction loses are bigger than the translational loses.
D) translation losses are not recognized in the consolidated financial statements.
Answer: A
Diff: 2
Topic: 10.4 Managing Translation Exposure
Skill: Conceptual

9
Copyright © 2015 Pearson Education, Inc.
Essay Questions

10.1 Overview of Translation

1) The two methods for the translation of foreign subsidiary financial statements are the current
rate and temporal methods. Briefly, describe how each of these methods translates the foreign
subsidiary financial statements into the parent company's consolidated statements. Identify when
each technique should be used and the major advantage(s) of each.
Answer: The current rate method translates almost all line items from the foreign subsidiary to
the parent consolidated statements at the current exchange rate. This is the most commonly used
method in the world today. Assets and liabilities are translated at current exchange rate and items
found on the income statement are translated at the actual exchange rate on the date of
transaction, or as an average over the statement period where appropriate. Equity accounts are
translated at historical costs.

Any gains or loses caused by translation adjustments are typically placed into a special reserve
account (such as a CTA). Thus, gains or losses do not go through the income statement and do
not increase the volatility of net income. This is perhaps the biggest advantage to using the
current rate method.

By contrast, the temporal method assumes that several individual financial statement items are
periodically restated to reflect their market value. The temporal method translates individual line
items based on monetary/nonmonetary criteria where monetary assets such as cash and
marketable securities are translated at current exchange rates, but nonmonetary assets such as
fixed assets are translated at historical rates. The gains or losses that result from translation
remeasurement are recorded on the consolidated income statement and impact upon the volatility
of net income. The temporal method of using historical costs may be more consistent with the
practice of carrying domestic items at cost on the financial statements.
Diff: 3
Topic: 10.1 Overview of Translation
Skill: Conceptual

10.2 Translation Methods

1) There are no questions in this section.

10.3 Trident Corporation's Translation Exposure

1) There are no questions in this section.

10
Copyright © 2015 Pearson Education, Inc.
10.4 Managerial Implications

1) Describe a balance sheet hedge and give at least two examples of when such a hedge could be
justified.
Answer: A balance sheet hedge attempts to equalize the amount of assets and liabilities of a
foreign subsidiary exposed to translation risk. Thus, the gain to the firm from a change in
exchange rates will be perfectly offset by an equal and opposite loss. Firms may engage in
balance sheet hedges under conditions of hyperinflation, or when the subsidiary is about to be
liquidated and the value of the CTA account would be realized.
Diff: 3
Topic: 10.4 Managing Translation Exposure
Skill: Conceptual

11
Copyright © 2015 Pearson Education, Inc.
Another random document with
no related content on Scribd:
 between May 1, 1898, and June 30, 1899.

[Off. = Officer; Enl. = Enlisted Men.]

COUNTRY KILLED. DIED OF

DISEASE. ACCIDENT.
WOUNDS
Off. Enl. Off. Enl. Off.
Enl. Off. Enl.
REGULARS.
United States 1 5 10 32
874 1 51
Cuba 19 184 5 60 8
381 7
Porto Rico 3
73 3
Hawaiian Islands
10 1
Philippine Islands 4 81 1 33 4
109 10
At sea 1 11 4
77

Total 24 270 7 114 51

1,524 1 72

VOLUNTEERS.
United States 1 87
2,836 3 111
Cuba 3 39 10 16
457 2 12
Porto Rico 3 1
157 5
Hawaiian Islands
33 1
Philippine Islands 14 146 3 67 5
215 6
At sea 5
122 2

Total 17 188 3 78 114

3,820 5 137

Aggregate 38 458 10 192 165

5,344 6 209

COUNTRY. DROWNED. SUICIDE.

MURDER TOTAL.

HOMICIDE
Off. Enl. Off. Enl. Off.
Enl. Off. Enl.
REGULARS.
United States 1 16 19
18 35 993
Cuba 7 5
6 32 650
Porto Rico 1 3
1 3 81
Hawaiian Islands 1
12
Philippine Islands 19 1 3
1 10 256
At sea 1 4 2
6 94
Total 2 48 1 32
26 86 2,086

VOLUNTEERS.
United States 23 1 15
22 91 3,008
Cuba 4
3 21 525
Porto Rico 2 1
1 1 169
Hawaiian Islands
34
Philippine Islands 1 9 3
23 446
At sea 2 1
5 127

Total 1 40 1 20
26 141 4,309

Aggregate 3 88 2 52
52 224 6,395

{630}

Recapitulation of casualties in action in the armies of the

United States between May 1, 1898, and June 30, 1899.

[Off. = Officer; Enl. = Enlisted Men.]

COUNTRY. KILLED. WOUNDED.

TOTAL. AGGREGATE
Off. Enl. Off. Enl. Off.
Enl.
REGULARS.

Cuba 18 183 86 1,126 104

1,309 1,413
Porto Rico 1 2 15 2
16 18
United States 1 5 10 1
15 16
Philippines, to
August 13, 1898 7 1 25 1
32 33
Philippines since
February 4, 1899 2 74 20 410 22
484 506

Total 21 270 109 1,586 130

1,856 1,986

VOLUNTEERS.

Cuba 3 39 15 218 18
257 275
Porto Rico 3 2 21 2
24 26
Philippines,
to Aug. 13, 1898 11 9 74 9
85 94
Philippines, since
February 4, 1899 14 135 62 865 76
1,000 1,076

Total 17 188 88 1,178 105

1,366 1,471

Grand total 38 458 197 2,764 235

3,222 3,457

HOSPITALS.

From the declaration of war with Spain to September 20, 1899,

there have been established:

Beds.
20 field division hospitals, averaging 250 beds
each 5,000
31 general hospitals with a total capacity of
about 13,800
Railroad ambulance train
270
4 hospital ships
1,000

Total
20,070

In addition to these over 5,000 cases were treated in civil

hospitals. It is difficult even to approximate the number of
men treated in these hospitals. During that period somewhat
over 100,000 cases were admitted on sick report, a number
equal to 2,147 per 1,000 of strength during the year, or to
179 per 1,000 per month—the ratio of admissions to hospital
cases being 13 to 8. Using these data as a basis, and assuming
the mean strength of the Army (Regulars and Volunteers) to have
been 154,000, it would appear that from May 1, 1898, to
September 20, 1899, about 275,000 cases have been treated in
 these hospitals.

TRANSPORTATION OF SPANISH PRISONERS OF WAR TO SPAIN.

The following is a statement showing the dates of embarkation,

names of vessels, and number of officers, enlisted men, and
others who took passage:

[Date = Date of Embarkation,

Off. = Officers
Men = Enlisted men,
Women = Women and children over 5 years of
age,
Priests = Priests and Sisters of Charity.]

Date Name of Vessel. Off. Men Women

Priests Total

August 9 Alicante 38 1,069 6

11 1,124
August 14 Isla de Luzon 137 2,056 40
4 2,237
August 16 Covadonga 109 2,148 79
2,336
August 19 Villaverde 52 565 34
651
August 19 Isla de Panay 99 1,599 26
5 1,729
August 22 P. de Satrustegui 128 2,359 68
2,555
August 25 Montevideo 136 2,108 122
2 2,368
August 27 Cherihon 18 905 37
960
August 28 Colón 100 1,316 59
1,475
August 30 do 23 726 5
754
September 1 Leon XIII 113 2,209 108
2,430
September 3 San Ignacio 59 1,408 20
12 1,499
September 6 Leonora 15 1,118
1,333
September 12 Cindad de Cadiz 53 19
14 86
September 17 San Augustin 65 800 45
910
September 17 San Francisco 18 588 11
617

Total 1,163 20,974 679

48 22,864

ARMS AND AMMUNITION CAPTURED AT SANTIAGO.

Mauser carbines, Spanish, 7 mm 16,902

Mauser rifles, Argentine, 7½ mm 872
Remington rifles, 7 mm 6,118
Total rifles 23,892

Mauser carbines, Spanish 833

Mauser carbines, Argentine 7½ mm 84
Remington carbines, 7½ mm 330
 Total carbines 1,247

Revolvers 75

{631}

Mauser-Spanish—cartridges, 7 mm. 1,500,000

Mauser-Argentine—cartridges, 7½ mm. 1,471,200
Remington cartridges, 7½ mm 1,680,000

Total. 4,651,200

Nine hundred and seventy-three thousand

Remington
cartridges, 7½ mm., worthless.

STRENGTH OF THE NAVY, REGULAR AND AUXILIARY.

The number of enlisted men allowed by law prior to the

outbreak of hostilities was 12,500. On August 15, when the
enlisted force reached its maximum, there were 24,123 men in
the service. This great increase was made necessary by the
addition of 128 ships to the Navy. The maximum fighting force
of the Navy, separated into classes, was as follows:

Battle ships (first class). 4

Battle ships (second class). 1
Armored cruisers. 2
Coast defense monitors. 6
Armored ram. 1
Protected cruisers. 12
Unprotected cruisers. 3
Gunboats. 18
 Dynamite cruiser. 1
Torpedo boats. 11
Vessels of old Navy,
Including monitors. 14
Auxiliary Navy:
Auxiliary cruisers. 11
Converted yachts. 28
Revenue cutters. 15
Light-house tenders. 4
Converted tugs. 27
Converted colliers. 19
Miscellaneous. 19

NAVAL, PRISONERS OF WAR CAPTURED OFF SANTIAGO,

JULY 3, 1898.

Officers. 99
Enlisted men. 1,675

CASUALTIES IN ACTION.

ENGAGEMENT. Casualties Killed

Wounded Died later

from wounds
Action at Manila Bay,
May 1 9 9
Action off Cienfuegos,
May 11 12 1 11
1
Action off Cardenas,
May 11. 8 5 3
Action off San Juan,
 Porto Rico, May 12 8 1 7
Engagements at Guantanamo,
Cuba, June 11 to 20 22 *6 16
Engagement off Santiago:
June 22 10 1 9
July 3 11 1 10
Miscellaneous:
Yankee, June 13. 1 1
Eagle, July 12 1 1
Bancroft, August 2 1 1
Amphitrite, August 7 1 1 †l

Total 84 16 68
2

* One accidentally killed.

† Accidentally shot.

Congressional Record,
February 1, 1901, pages 1941-1962.

UNITED STATES OF AMERICA: A. D. 1898-1899.

Investigation of the conduct of the War Department
in the war with Spain.

Severe criticism of the conduct of the War Department during

the war with Spain, including many charges of inefficiency in
its service, produced by improper appointments made for
political reasons, and other charges of misdoing in the
purchase of supplies, under influences either political or
otherwise corrupt, led to the appointment by the President, in
September, 1898, of an investigating commission, composed of
nine soldier and civilian members, as follows:
General Grenville M. Dodge, President.
Colonel James A. Sexton.
Colonel Charles Denby,
Captain Evan P. Howell,
Honorable Urban A. Woodbury,
Brigadier-General John M. Wilson, U. S. A.,
General James A. Beaver,
Major-General Alexander McD. Cook, U. S. A.,
Dr. Phineas S. Conner.

The report of the Commission, made in the following February,

cannot be said to have been a convincing and satisfactory one
to the country at large. It was indignantly described as a
"whitewashing report," even by many journals and writers of
the party in power. Its inquiries did not appear to have been
keenly and impartially searching; its conclusions were not
thought to be drawn with a rigorous and fearless hand.

The charges against the War Department which excited most

feeling and drew most public attention related to the quality
of the fresh beef supplied to the army, which was in two
forms, refrigerated and canned. Major-General Miles,
commanding the Army, had declared that much of the
refrigerated beef furnished to the soldiers should be called
"embalmed beef," maintaining that it had been "apparently
preserved with secret chemicals, which destroy its natural
flavor" and which were believed to be "detrimental to the
health of the troops." He intimated that hundreds of tons of
such beef had been contracted for by the Commissary-General
"under pretense of experiment." In repelling this serious
accusation, Commissary-General Charles P. Eagan read a
statement before the Commission, so violent and unmeasured in
its vituperation of the commanding general that it was
returned to him for correction; many newspapers declined to
publish it, and he was subsequently tried by court-martial in
consequence—as related below. The conclusion of the
Commission on the subject of the charges relating to
refrigerated beef was stated in its report as follows:
 "The Commission is of the opinion that no refrigerated beef
furnished by contractors and issued to the troops during the
war with Spain was subjected to or treated with any chemicals
by the contractors or those in their employ."

Concerning the canned beef, which had caused much disgust in

the army, the Commission reported:

"The result of our own testing and of all the analyses made at
our instance … is that the canned meat which has been brought
to our attention is pure, sound, and nutritive. It has not
been found to contain any acids or any deleterious substance,
but to be unadulterated meat. The testimony before us is that
the canned meat is not, in general, intended to be issued to
troops except as an emergency ration. The preponderance of the
proof is that meat on the hoof and the refrigerated beef are
more acceptable. A number of officers and others have
testified that the meat is unpalatable. Its palatability
greatly depends upon the mode in which it is cooked. In a
tropical climate, carried on the march, exposed to heat, the
meat so changes in appearance as to become repulsive. In the
Navy, where the meat is properly cared for, there has been no
complaint, so far as has appeared in evidence before us. After
careful consideration we find that canned meat, as issued to
the troops, was generally of good quality, was properly
prepared, and contained no deleterious substance.
{632}
At times probably material of poor quality is issued; in one
of the cans sent to us and examined by the chemist a large
amount of gristle was found. That it was not issued 'under
pretense of an experiment' is indicated by the fact that it
has been in use in the Army for more than 20 years."

On the general management of the Quarter-master's Department,

with which much fault had been found, the Commission reported:
"The conclusions drawn … are as follows:
"1. The Quartermaster's Department, a month before war was
declared, was neither physically nor financially prepared for
the tremendous labor of suddenly equipping and transporting an
army over ten times the size of the Regular Army of the United
States.

"2. That the department devoted the ability, zeal, and

industry of its officers to accomplish the herculean task
before it so soon as funds were made available and war was
declared.

"3. That it deserves credit for the great work accomplished,

for the immense quantity of materials obtained and issued
within so short a period, and for its earnest efforts in
reference to railroad transportation and in protecting the
great interests of the General Government committed to its
charge. Its officers, especially those at the head-quarters of
the department and at its depots, worked earnestly and
laboriously day and night, sparing themselves in no possible
way.

"4. There appears to have been a lack of system, whereby, even

as late as October, troops in camps and in the field were
lacking in some articles of clothing, camp and garrison
equipage; and hospitals, at least at two important localities
in the South—Fort Monroe, Virginia, and Huntsville,
Alabama—lacked stoves, while at Huntsville fuel was wanting.

"5. There appears to have been lack of executive or

administrative ability, either on the part of the
Quartermaster's Department or the railroad officials, in
preventing the great congestion of cars at Tampa and
Chickamauga when these camps were first established, which
congestion caused delay, annoyance, and discomfort to the
large bodies of troops concentrating at those places.

"6. There appears to have been a lack of foresight in

preparing and promptly having available at some central
locality on the seacoast the necessary fleet of transports
which it seemed evident would be required for the movement of
troops to a foreign shore, and, finally, when the call came
suddenly and the emergency was supreme, the department appears
not to have fully comprehended the capacity of the fleet under
its command; not to have supplied it with a complete outfit of
lighters for the immediate disembarkation of troops and
supplies; to have accepted without full investigation the
statement that the vessels were capable of transporting 25,000
men, while really they could not and did not transport more
than 17,000 with their artillery, equipments, ammunition, and
supplies, and lacked sufficient storage room for the necessary
amount of wagon transportation—that very important element
in the movement of an army in the face of an enemy.

"7. The Quartermaster's Department should maintain on hand at

all times a complete supply for at least four months for an
army of 100,000 men of all articles of clothing, camp and
garrison equipage, and other quartermaster's supplies which
will not deteriorate by storage or which cannot at once be
obtained in open market.

"Finally. In the opinion of this commission, there should be a

division of the labor now devolving upon the Quartermaster's
Department."

In another part of its report, dealing especially with the

Santiago campaign, the Commission makes a statement which
seems to reflect some additional light on the sixth paragraph
of the finding quoted above, relative to the unpreparedness of
the quartermaster's department for the landing of the Santiago
expedition. It says:

"The Navy Department, on the 31st of May, 1898, sent the

following communication to the honorable the Secretary of War:
'This Department begs leave to inquire what means are to be
employed by the War Department for landing the troops,
artillery, horses, siege guns, mortars, and other heavy
objects when the pending military expedition arrives on the
Cuban coast near Santiago. While the Navy will be prepared to
furnish all the assistance that may be in its power, it is
obvious that the crews of the armored ships and of such others
as will be called upon to remove the Spanish mines and to meet
the Spanish fleet in action can not be spared for other purposes,
and ought not to be fatigued by the work incident to landing
of the troops and stores, etc.' This information, so far as
can be ascertained, was never communicated to either General
Miles or General Shafter; the expedition therefore left Tampa
with no facilities for landing other than were afforded by the
boats of the several transports conveying the expedition, with
the exception of several lighters and steam tugs of light draft,
such as could be hastily secured."

On the conduct of the Medical Department, which was another

matter of investigation, the Commission reported: "To sum up,
in brief, the evidence submitted shows:

" 1. That at the outbreak of the war the Medical Department

was, in men and materials, altogether unprepared to meet the
necessities of the army called out.

"2. That as a result of the action through a generation of

contracted and contracting methods of administration, it was
impossible for the Department to operate largely, freely, and
without undue regard to cost.

"3. That in the absence of a special corps of inspectors, and

the apparent infrequency of inspections by chief surgeons, and
of official reports of the state of things in camps and
hospitals, there was not such investigation of the sanitary
conditions of the army as is the first duty imposed upon the
Department by the regulations.
 "4. That the nursing force during the months of My, June, and
July was neither ample nor efficient, reasons for which may be
found in the lack of a proper volunteer hospital corps, due to
the failure of Congress to authorize its establishment, and to
the nonrecognition in the beginning of the value of women
nurses and the extent to which their services could be
secured.

"5. That the demand made upon the resources of the Department
in the care of sick and wounded was very much greater than had
been anticipated, and consequently, in like proportion, these
demands were imperfectly met.

{633}

"6. That powerless as the Department was to have supplies

transferred from point to point, except through the
intermediation of the Quartermaster's Department, it was
seriously crippled in its efforts to fulfil the regulation
duty of 'furnishing all medical and hospital supplies.'

"7. That the shortcomings in administration and operation may

justly be attributed, in large measure, to the hurry and
confusion incident to the assembling of an army of untrained
officers and men, ten times larger than before, for which no
preparations in advance had been or could be made because of
existing rules and regulations.

"8. That notwithstanding all the manifest errors, of omission

rather than of commission, a vast deal of good work was done
by medical officers, high and low, regular and volunteer, and
there were unusually few deaths among the wounded and the
sick.

"What is needed by the medical department in the future is—

"1. A larger force of commissioned medical officers.

"2. Authority to establish in time of war a proper volunteer
hospital corps.

"3. A reserve corps of selected trained women nurses, ready to

serve when necessity shall arise, but under ordinary
circumstances, owing no duty to the War Department, except to
report residence at determined intervals.

"4. A year's supply for an army of at least four times the

actual strength, of all such medicines, hospital furniture,
and stores as are not materially damaged by keeping, to be
held constantly on hand in the medical supply depots.

"5. The charge of transportation to such extent as will secure

prompt shipment and ready delivery of all medical supplies.

"6. The simplification of administrative 'paper work,' so that

medical officers may be able to more thoroughly discharge
their sanitary and strictly medical duties.

"7. The securing of such legislation as will authorize all

surgeons in medical charge of troops, hospitals, transports,
trains, and independent commands to draw from the Subsistence
Department funds for the purchase of such articles of diet as
may be necessary to the proper treatment of soldiers too sick
to use the army ration. This to take the place of all
commutation of rations of the sick now authorized.

"Convalescent soldiers traveling on furlough should be

furnished transportation, sleeping berths or staterooms, and
$1.50 per diem for subsistence in lieu of rations, the soldier
not to be held accountable or chargeable for this amount."

Report of the Commission, volume 1.

Public opinion of the report, when divested of partisan

prejudice, was probably expressed very fairly in the following
comments of "The Nation," of New York:

"The two leading conclusions of the court of inquiry as to the

quality of the beef supplied to our troops during the war with
Spain, are in accordance with the evidence and will be
accepted as fairly just by the country. The court finds that
so far as the canned roast beef was concerned, the charges
which General Miles made against it as an unsuitable ration
are sustained, but that as regards the use of chemicals in the
treatment of refrigerated beef his charges were not
established. If instead of saying 'not established,' the court
had said 'not fully sustained,' its verdict would have been
above criticism on these two points. There was evidence of the
use of chemicals, but it was not conclusive and was flatly
contradicted. There is no doubt whatever that the use of the
refrigerated beef was a blunder, but there was very little
evidence to sustain a more serious charge than that against
it.

"But while the court has found justly on these points, it is

difficult to read its report without feeling that its members
did so reluctantly, and that, if left to follow their
inclinations, they would have censured General Miles and
allowed everybody else concerned to go free. General Miles is
the one person involved whom they allow no extenuating
circumstances to benefit in their report. At every opportunity
they take the worst possible view of his conduct, while almost
invariably taking the most lenient view possible of nearly
everybody else. … So far as the findings of the court apply to
Eagan's conduct, they are condemnatory in general terms, but
they do not seek to go behind him for the reasons for his
conduct. … No attention whatever is paid to the evidence of
several reputable witnesses that Eagan had told them that he
had to buy of certain contractors; none is paid, either, to
the evidence of Eagan's subordinates that he himself so
altered the refrigerated beef contracts that no one could say
whether they called for preservation for seventy-two hours or
twenty-four. Leniency of this kind is never shown toward
General Miles."

The Nation,
May 11, 1899.

Perhaps a weightier criticism is represented by the following,

which we quote from an article contributed to "The
Independent" by General Wingate, President of the National
Guard Association of the United States: "So far as the
refrigerated beef was concerned, the truth probably is that
there was little, if any, 'embalming' about it. Soldiers
generally agree that the beef itself was almost universally
good. … General Miles, on the other hand, was clearly right in
asking that the troops might be furnished with beef cattle on the
hoof, which could follow the army over any road and which
would keep in good condition on the luxuriant grasses of Cuba
and Porto Rico. This was the system pursued in our Civil War.
No one has yet explained why it was abandoned for the
experiment of furnishing this kind of beef to places in the
tropics where it had to be hauled in wagons for many hours
over muddy roads, and when most of the wagons required to move
it promptly had to be left behind for want of water
transportation.

"The matter of the refrigerated or so-called 'embalmed' beef

is, however, of very slight consequence compared with that of
the canned roast beef. The use of that beef as an army ration
in this country, at least, was new. Officer after officer has
testified before the court of inquiry that they never saw it
so issued before the Cuban campaign. It is true that the navy
uses it, but the facilities on shipboard for caring for and
cooking food are so different and so superior to those of an
army in the field that no comparison can justly be made
between them. Moreover, as was recently stated in the 'Army
and Navy Journal,' the belief is general in the navy that the
 canned beef it had rejected on inspection was afterward sold
to the army and accepted by it without inspection.
{634}
Be this as it may, the evidence is overwhelming that the
canned roast beef which was issued to the army was repulsive
in appearance and disagreeable in smell. … Governor Roosevelt
says in his testimony that 'from generals to privates he never
heard any one who did not condemn it as an army ration.' Its
defects appeared on the voyage to Santiago, if not before. It
was then so bad that the men would not touch it, and as
Governor Roosevelt says in his article in 'Scribner's,' his
Rough Riders, who certainly were not particular, could not eat
it, and as it constituted one-third of the rations, his men
had to go hungry. And yet, in spite of these facts, a million
pounds of that beef was purchased from Armour & Co. alone, and
its issue was continued not only in Cuba but in Porto Rico.
What is worse than all, after its defects were fully known it
was issued as a traveling ration to the fever-racked men on
their homeward voyage to this country; men who needed and were
entitled to receive the most nourishing food and to whom this
indigestible stuff was poison. This should never be forgotten
or forgiven by the plain people of the country. …

"No one in authority has been willing to admit that there was
the slightest thing wrong, or the least need for improvement
in his department. … This is another of the hundreds of
examples which have occurred in our past war, and which will
continue to take place in the future until the whole staff
system of the army has been rectified, of the reign of that
hide bound bureaucratic spirit which induces the head of a
department in Washington to decide in his office what should
be used by the troops in the field without practical
experience on the subject, and to stubbornly close his eyes
and ears to everything which will tend to show that it is
possible that his department has made a mistake. …

"It is noticeable that so far not an official in any of the