Economic exposure is the risk resulting from the effects of changes in foreign exchange rates on the firm's value.

Question

Quizplus · Accepted Answer

Economic exposure is a real risk faced by firms engaged in international trade or investment, and it refers to the impact of exchange rate fluctuations on their financial performance and value. It can affect their revenue, costs, profits, cash flows, competitiveness, and overall market position. Economic exposure is different from transaction exposure (the risk of loss or gain on specific foreign exchange transactions) and translation exposure (the risk of accounting changes due to the translation of foreign currency financial statements into the reporting currency).

Economic Exposure Is the Risk Resulting from the Effects of Changes