Lazer Co. is a U.S. firm that exports computers to Belgium, invoiced in euros, and to Italy, invoiced in dollars. Additionally, Lazer Co. has a subsidiary in South Korea that produces computers and sells them there. Lazer also has competitors in different countries. Lazer Co. is subject to:
A) transaction exposure.
B) economic exposure.
C) translation exposure.
D) All of these are correct.

Question

Quizplus · Accepted Answer

Lazer Co. is subject to all three types of exposures.
- Transaction exposure arises from the potential risk of changes in exchange rates between the time a transaction is initiated and settled.
- Economic exposure refers to the impact of currency fluctuations on a firm's future cash flows and competitiveness in global markets.
- Translation exposure arises from the need to translate foreign currency financial statements into the parent company's reporting currency for consolidation purposes.

Lazer Co Is a U