The risk exposure resulting from the translation of foreign currency denominated financial risks is referred to as:
A)Translation (Accounting)exposure.
B)Transaction exposure.
C)Economic exposure.
D)Business risk.

Question

Quizplus · Accepted Answer

Translation exposure specifically refers to the risk of exchange rate fluctuations on the translation of financial statements from a foreign currency to the reporting currency of a company. Transaction exposure, on the other hand, refers to the risk of exchange rate fluctuations on specific financial transactions (e.g. purchasing or selling goods/services) denominated in foreign currencies. Economic exposure refers to the overall impact of exchange rate fluctuations on a company's cash flows, while business risk is a broader term encompassing all risks related to a company's operations.

The Risk Exposure Resulting from the Translation of Foreign Currency