Which of the following statements hold true in general?
A) Eliminating transaction exposure will also eliminate translation exposure.
B) Eliminating transaction exposure will increase translation exposure.
C) Eliminating transaction exposure will reduce translation exposure.
D) None of these.

Question

Quizplus · Accepted Answer

Transaction exposure and translation exposure are distinct types of foreign exchange exposures. Eliminating one does not necessarily eliminate or directly affect the other in a predictable way. Transaction exposure deals with actual cash flows from transactions, while translation exposure relates to the accounting representation of those and other values in financial statements.

Which of the Following Statements Hold True in General