The extent to which a firm's future international earning power is affected by changes in exchange rates is known as:

Question

Quizplus · Accepted Answer

Economic exposure refers to the impact of exchange rate fluctuations on a company's future international earnings, while translation exposure refers to the impact of exchange rate fluctuations on a company's financial statements. Financial exposure is the risk that a company's financial condition or performance will be adversely affected by exchange rate fluctuations, and transaction exposure is the risk that arises from a company's contractual obligations denominated in a foreign currency. Therefore, economic exposure is the most relevant option for the given question.

The Extent to Which a Firm's Future International Earning Power