A U.S.-based company that exports goods and has accounts receivable denominated in a foreign currency ________.
A) faces no risk if the relations between the countries get rough
B) faces the risk that the U.S. dollar will depreciate in value relative to the foreign currency
C) faces the risk that the U.S. dollar will appreciate in value relative to the foreign currency
D) faces the risk that the foreign currency would appreciate in value relative to the U.S dollar

Question

Quizplus · Accepted Answer

As a U.S.-based company with accounts receivable in a foreign currency, the company faces the risk that the U.S. dollar will appreciate in value relative to the foreign currency. This means that when the foreign currency is converted to U.S. dollars, the company will receive fewer dollars than they would have if the exchange rate had remained the same or lowered. The risk is that their profits will be impacted negatively.

A US-Based Company That Exports Goods and Has Accounts Receivable Denominated