Which of the following are true statements?
A)Since translation exposure does not have an immediate direct effect on operating cash flows, its control is relatively unimportant in comparison to transaction exposure, which involves potential real cash flow losses.
B)Since it is generally not possible to eliminate both translation exposure and transaction exposure, it is more logical to effectively manage transaction exposure.
C)Two ways to control translation risk are: a balance sheet hedge and a derivatives "hedge."
D)All of the above are true statements

Question

Quizplus · Accepted Answer

All of the statements are true. Translation exposure may not have an immediate impact on operating cash flows, but it can affect long-term competitiveness and value of the firm. Both translation exposure and transaction exposure need to be effectively managed to mitigate the foreign currency risk. The two common ways to control translation risk are through balance sheet hedge and derivatives hedge.

Which of the Following Are True Statements