Some MNCs are subject to economic exposure without being subject to transaction exposure.

Question

Quizplus · Accepted Answer

Economic exposure refers to the impact of exchange rate fluctuations on a company's future cash flows, while transaction exposure refers to the impact of exchange rate fluctuations on a company's existing contractual obligations. Therefore, a company can be subject to economic exposure if it has future cash flows denominated in foreign currency, but not necessarily subject to transaction exposure if it does not have any existing contractual obligations denominated in foreign currency.

Some MNCs Are Subject to Economic Exposure Without Being Subject