A transaction exposure for a U.S. company ________.
A) occurs when the dollar value of a payable from exports changes as the exchange-rate changes
B) generally takes place when foreign currencies weaken against the dollar
C) occurs when reporting systems are inadequate
D) does not result in a gain or loss in cash flows

Question

Quizplus · Accepted Answer

Transaction exposure refers to the risk of loss from exchange rate fluctuations on a specific transaction, such as paying for imports or receiving payment for exports. In the case of a U.S. company, this exposure occurs when the dollar value of a payable from exports changes as the exchange rate changes. Therefore, option A is the correct choice. Option B is incorrect because transaction exposure can also occur when foreign currencies strengthen against the dollar. Option C is incorrect because inadequate reporting systems do not relate to transaction exposure. Option D is incorrect because transaction exposure can result in a gain or loss in cash flows.

A Transaction Exposure for a U.S. Company ________