A true MNC, with operations in dozens of different countries
A)must effectively manage foreign exchange risk.
B)can ignore foreign exchange risk since it is diversified.
C)will pay taxes in only its home county.
D)none of the above

Question

Quizplus · Accepted Answer

A true MNC with operations in different countries will be exposed to foreign exchange risk, as fluctuations in currency exchange rates can significantly impact its earnings and cash flows. As a result, MNCs must manage this risk effectively by using hedging techniques like forward contracts, options, swaps, etc. Ignoring foreign exchange risk can lead to significant financial losses and impact the MNC's overall profitability. Additionally, MNCs will pay taxes in different countries in which they operate, depending on the tax laws of that particular country.

A True MNC, with Operations in Dozens of Different Countries