For a US-based MNC to rely on invoice currency to reduce transaction exposure means that the firm:
A)will invoice its customers in terms of US dollars.
B)will invoice its customers in the home currency of each customer.
C)will increase its cost related to collection of amounts owed to it.
D)will not be concerned about the currency in which its receivables are expressed.

Question

Quizplus · Accepted Answer

When a US-based MNC invoices its customers in US dollars, it reduces its transaction exposure as the company receives the payment in a stable currency. This means that the MNC is not susceptible to fluctuations in exchange rates between the time of the sale and the time the payment is received. Invoicing in the home currency of each customer (B) can increase transaction exposure as the MNC is exposed to fluctuations in exchange rates between the customer's currency and the US dollar. Choice C is incorrect as invoicing in US dollars does not necessarily increase collection costs. Choice D is incorrect as the currency of receivables can still be important for financial reporting purposes.

For a US-Based MNC to Rely on Invoice Currency to Reduce