Transaction exposure reflects:
A) the exposure of a firm's international transactions to exchange rate fluctuations.
B) the exposure of a firm's local currency value to transactions between foreign exchange traders.
C) the exposure of a firm's financial statements to exchange rate fluctuations.
D) the exposure of a firm's cash flows to exchange rate fluctuations.

Question

Quizplus · Accepted Answer

Transaction exposure refers to the risk of an organization's cash flows and financial statements being affected by fluctuations in exchange rates. It relates to the exposure of a firm's international transactions, such as imports, exports, and payments, to exchange rate fluctuations. Choice B describes dealer exposure, while choice C describes translation exposure, and choice D describes operating exposure.

Transaction Exposure Reflects