Tiger Importers buys goods from the Far East on credit terms of net 45. Because of the delay in payment, Tiger has ______ exposure to exchange rate risk.

Question

Quizplus · Accepted Answer

Tiger Importers has a short-run exposure to exchange rate risk because they have credit terms of net 45, meaning they must make payment within a relatively short period of time. If the exchange rate fluctuates unfavorably during this time, Tiger will face higher costs when paying their suppliers. However, this exposure is only in the short-run as they will eventually pay their suppliers and eliminate their exposure. The other options, such as elimination of the firm's exposure, transfer, or translation, are not relevant in this scenario.

Tiger Importers Buys Goods from the Far East on Credit