The risk exposure resulting from the possible reduction in terms of the domestic reporting foreign currency,of the discounted future cash flows generated from foreign investments or operations due to real changes in exchange rates is referred to as:
A)Translation (accounting)exposure.
B)Transaction exposure.
C)Economic exposure.
D)Business risk.

Question

Quizplus · Accepted Answer

Economic exposure refers to the risk exposure resulting from changes in exchange rates that affect the future cash flows generated from foreign investments or operations. This type of exposure is not related to accounting or specific transactions, but rather reflects the overall impact of exchange rate fluctuations on the value of a company's foreign investments. Business risk refers to the risk exposure resulting from uncertainties in the general business environment, such as changes in technology or consumer preferences. Translation exposure and transaction exposure are also types of exchange rate risk, but they relate to specific accounting treatments of foreign currency transactions and financial statements, respectively.

The Risk Exposure Resulting from the Possible Reduction in Terms