Company X from USA has localized production near its suppliers in EU and exports its products worldwide. The company
A) does not have transactional exposure because majority of its suppliers are invoicing in Euros.
B) does not have translational exposure because it consolidates its reports in US dollars.
C) is not exposed to changes in foreign exchange rates.
D) has transactional, translational and operating type of exposure.

Question

Quizplus · Accepted Answer

The company has transactional exposure because it buys and sells products in different currencies, which increases the risk of losses due to fluctuations in currency exchange rates.

The company also has translational exposure because it consolidates its reports in US dollars, which exposes it to the risk of translation losses due to fluctuations in currency exchange rates.

Finally, the company may have operating exposure if changes in foreign exchange rates impact its competitiveness, sales, and profitability.

Company X from USA Has Localized Production near Its Suppliers