Which of the following is true?
A)Some items that are a source of transaction exposure are also a source of translation exposure.
B)Some items that are a source of transaction exposure are not also a source of translation exposure.
C)Some items that are a source of transaction exposure are also a source of translation exposure,but some items that are a source of transaction exposure are not also a source of translation exposure.
D)none of the options

Question

Quizplus · Accepted Answer

Transaction exposure and translation exposure in the context of international finance refer to different types of risks associated with changes in exchange rates. Transaction exposure relates to the effect of exchange rate changes on the value of transactions that have already been entered into but not yet settled, such as receivables or payables in foreign currency. Translation exposure, on the other hand, deals with the impact of exchange rate changes on the reported consolidated financial statements of a multinational company, particularly when foreign operations' financials are converted to the parent company's reporting currency. Some items, like receivables or payables, can be subject to both transaction and translation exposure. However, not all items that are subject to transaction exposure (e.g., anticipated future transactions that might not be recognized in financial statements yet) are necessarily subject to translation exposure. Therefore, both parts of statement C are correct.

Which of the Following Is True