A risk that shareholder wealth-maximizing managers should seek to offset in the firm that they are managing is _____ risk.
A) dividend payout
B) exchange rate
C) research and development
D) leasing

Question

Quizplus · Accepted Answer

Exchange rate risk refers to the potential losses that a firm may incur if the exchange rate between two currencies changes unfavorably. This risk can impact the firm's profitability and cash flows, especially if the firm engages in international trade or has foreign currency-denominated assets or liabilities. Shareholder wealth-maximizing managers should seek to offset this risk by implementing effective currency hedging strategies or diversifying their operations across multiple currencies. The other options (dividend payout, research and development, and leasing) may represent potential risks or opportunities for a firm, but they do not necessarily require specific risk-mitigating actions from shareholder wealth-maximizing managers.

A Risk That Shareholder Wealth-Maximizing Managers Should Seek to Offset