If a firm's financial performance responds to changes in currency value:
A)the firm faces a currency risk.
B)additional investment of funds in the firm is necessary.
C)the firm's risk management strategy is flawed.
D)the firm should abandon its foreign operations.

Question

Quizplus · Accepted Answer

If a firm's financial performance responds to changes in currency value, it means that the firm is exposed to currency risk. The fluctuations in currency value can affect the firm's revenue, profit, and cash flows, especially if the firm has foreign operations or engages in international trade. Therefore, the firm should have a currency risk management strategy to mitigate the potential impact of these changes. Simply abandoning foreign operations may not be the most strategic choice for the firm.

If a Firm's Financial Performance Responds to Changes in Currency