The sensitivity of the firm's consolidated financial statements to unexpected changes in the exchange rate is
A)transaction exposure.
B)translation exposure.
C)economic exposure.
D)none of the options

Question

Quizplus · Accepted Answer

Translation exposure refers to the impact of sudden and unexpected changes in exchange rates on the financial statements of a firm that operates in multiple countries. It arises due to the need to translate the financial performance of foreign subsidiaries into the parent company's reporting currency. This exposure can affect a firm's balance sheet, income statement, and cash flow statement, making it sensitive to changes in exchange rates. Therefore, the sensitivity of a firm's consolidated financial statements to unexpected changes in the exchange rate is translation exposure.

The Sensitivity of the Firm's Consolidated Financial Statements to Unexpected