Scenario - The Gayla Corporation The Gayla Corporation is a multinational business that conducts operations in twelve foreign markets. This multi-million dollar organization is very familiar with currency exchanges and has considerable understanding when it comes to the risks associated with operating in the global market arena. The Gayla Corporation claims it would not be as successful without the expertise of the financial wizards that work for it. The company has not lost money so far and plans to stay that way. The Gayla Corporation must fully understand and effectively handle all the ways in which long-term exchange rate movements affect the firm. Which of the following best identifies what this organization is facing in this situation?

Question

Scenario - The Gayla Corporation The Gayla Corporation is a multinational business that conducts operations in twelve foreign markets.  This multi-million dollar organization is very familiar with currency exchanges and has considerable understanding when it comes to the risks associated with operating in the global market arena.  The Gayla Corporation claims it would not be as successful without the expertise of the financial wizards that work for it. The company has not lost money so far and plans to stay that way. The Gayla Corporation must fully understand and effectively handle all the ways in which long-term exchange rate movements affect the firm. Which of the following best identifies what this organization is facing in this situation?

Quizplus · Accepted Answer

Economic risk is the risk faced by companies operating in multiple markets due to changes in currency exchange rates. This risk can lead to losses or decreased profits for the company. The Gayla Corporation is facing economic risk as it conducts operations in twelve foreign markets and must understand the impact of long-term exchange rate movements on its business. By claiming that it would not be as successful without the expertise of its financial wizards, the company is showing its awareness of the importance of managing this risk effectively. The other options, beta risk, transaction risk, hedging, and translation risk, are not as relevant to the situation described in the scenario.

Scenario - the Gayla Corporation the Gayla Corporation Is a Multinational