Stable currency values make it easier for firms to predict future earnings accurately in terms of the home-country currency.

Question

Quizplus · Accepted Answer

Stable currency values help firms to make accurate predictions regarding their future earnings in terms of their home-country currency because they can expect the same exchange rate between currencies. This helps them to better plan their budgets, investments and other financial decisions. On the contrary, if the currency values are volatile, it becomes difficult for firms to make accurate predictions regarding their future earnings, making it harder to plan future investments and budgeting.

Stable Currency Values Make It Easier for Firms to Predict