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 the above.

Question

Quizplus · Accepted Answer

Lazer Co. faces transaction exposure as it is invoicing its exports in different currencies and is subject to fluctuations in exchange rates at the time of payment. Additionally, the company is exposed to economic exposure as it competes with local firms in different countries and must adapt to changes in economic conditions such as interest rates, inflation, and political instability. Finally, Lazer Co. may face translation exposure if it needs to consolidate its financial statements and convert foreign currency balances into U.S. dollars.

Lazer Co Is a U