NBC Uro Corp. is a large U.S. company that earns almost 70 percent of its revenue from foreign markets. When forecasting operations for the next few years, the company factors in a slow decline of the U.S. dollar in comparison to other leading global currencies. However, if instead of declining, the U.S dollar appreciates in the years ahead, this would mean that NBC Uro Corp faces a(n) _____.
A) situational exposure
B) compounded exposure
C) economic exposure
D) assessed exposure

Question

Quizplus · Accepted Answer

Economic exposure refers to the risk a company faces when its financial performance is affected by changes in exchange rates. If the U.S. dollar appreciates, NBC Uro Corp, which earns a significant portion of its revenue from foreign markets, may find its products becoming more expensive in those markets, potentially reducing demand and negatively impacting its financial results.