Assume that Atlanta Co. is producing motorcycles and selling them to U.S. customers. Atlanta Co. obtains all of its supplies from American firms and has no competition in the United States. It has one major competitor in Japan. Now assume that Phoenix Co. is producing office furniture and obtains its supplies from a Canadian firm. Based on this information, Atlanta Co. has ____ exposure and Phoenix Co. has ____ exposure.

Question

​Assume that Atlanta Co. is producing motorcycles and selling them to U.S. customers. Atlanta Co. obtains all of its supplies from American firms and has no competition in the United States. It has one major competitor in Japan. Now assume that Phoenix Co. is producing office furniture and obtains its supplies from a Canadian firm. Based on this information, Atlanta Co. has ____ exposure and Phoenix Co. has ____ exposure.

Quizplus · Accepted Answer

Atlanta Co. has economic exposure because it is exposed to changes in exchange rates that could affect its competitiveness against its Japanese competitor. Phoenix Co. has transaction exposure because it has a financial obligation (paying for supplies) denominated in a foreign currency (Canadian dollars) that could be affected by exchange rate fluctuations. There is no indication that either company has translation exposure.

​Assume That Atlanta Co

Assume That Atlanta Co