A foreign exchange exposure that occurs because of a change in the value of exposed assets or liabilities of foreign currency financial statements is a(n)________.
A) translation exposure
B) transaction exposure
C) economic exposure
D) hedge exposure

Question

Quizplus · Accepted Answer

A change in value of exposed assets or liabilities of foreign currency financial statements falls under translation exposure. Transaction exposure is the risk of an unfavorable change in exchange rates before a transaction is completed, while economic exposure refers to the impact of currency fluctuations on a firm’s overall cash flow and profitability. Hedge exposure is not a commonly used term in the context of foreign exchange exposure.

A Foreign Exchange Exposure That Occurs Because of a Change