The currency risk exposure given the most attention by financial managers is ______.
A) economic exposure
B) operating exposure
C) transaction exposure
D) translation exposure
E) None of the above

Question

Quizplus · Accepted Answer

Transaction exposure refers to the risk of loss from movements in exchange rates between the time a transaction is agreed upon and the time it is settled. This type of exposure is most relevant to financial managers as it directly affects their monetary flows and profits. Economic exposure refers to the impact of exchange rate changes on the overall value of a company, while operating exposure considers the impact on a company's future cash flows. Translation exposure is related to the translation of foreign subsidiaries' financial statements into the parent company's reporting currency.

The Currency Risk Exposure Given the Most Attention by Financial