The key to reducing _____ is to distribute the firm's productive assets to various locations so the firm's long-term financial well-being is not severely affected by adverse changes in exchange rates.

Question

Quizplus · Accepted Answer

Economic exposure refers to the risk of loss due to changes in economic conditions such as exchange rates, inflation rates, and interest rates. By distributing the firm's productive assets to various locations, the firm can reduce its economic exposure as adverse changes in exchange rates in one country will not severely affect the firm's long-term financial well-being. Transaction exposure refers to the risk of loss due to changes in exchange rates in the short term, while translation exposure relates to the impact of exchange rate changes on the value of the firm's financial statements. Countertrade and arbitrage are not directly related to reducing economic exposure.

The Key to Reducing _____ Is to Distribute the Firm's