If your firm produces a product that is used primarily by gold producers,then your firm might be subject to a risk related to the price of gold.If that risk is indirectly related to the price of gold,then this is an example of

Question

Quizplus · Accepted Answer

Economic exposure refers to the risk that a company faces due to fluctuations in exchange rates or other economic factors that affect its profitability or cash flows. In this case, the firm's exposure to the price of gold is an economic exposure because it affects its revenues and profits indirectly through its customers (gold producers). Transaction exposure refers to the risk that arises from the settlement of transactions in foreign currencies, while translation exposure pertains to the risk of changes in exchange rates on the financial statements of a company with operations in foreign countries. Therefore, neither A nor B is the correct answer.

If Your Firm Produces a Product That Is Used Primarily