When an enterprise has a receivable or payable denominated in a foreign currency and settlement of the obligation has not yet taken place, that firm is said to have ________ exposure.

Question

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Transaction exposure refers to the risk that an enterprise may face due to fluctuations in exchange rates between the time when a transaction is agreed upon and when it is settled. It is related to the impact of currency fluctuations on the future cash flows of the company. Accounting exposure refers to the impact of currency fluctuations on the financial statements of the company, while operating exposure refers to the impact of currency fluctuations on the company's competitive position in the market. Tax exposure is unrelated to currency fluctuations.

When an Enterprise Has a Receivable or Payable Denominated in a Foreign