Which of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true?
A)Fluctuating exchange rates pose no significant risks to a company's competitiveness in foreign markets.
B)Competitive advantages of manufacturing goods in a particular country are largely unaffected by fluctuating exchange rates.
C)Exporters are advantaged when the currency of the country where goods are being manufactured grows stronger.
D)Exporters always gain in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak.
E)Exporters always lose in cost/price competitiveness when the currency of the country in which the goods are manufactured is weak.

Question

Quizplus · Accepted Answer

When the currency of the country in which the goods are manufactured is weak, exporters gain in cost/price competitiveness as their products become relatively cheaper to foreign buyers. However, it is important to note that this advantage can be offset by higher production costs or increased competition from domestic companies who also benefit from the weaker currency. Fluctuating exchange rates can pose significant risks to a company's competitiveness in foreign markets as they can affect the cost of materials, the price of products, and the overall profitability of the business. Therefore, it is important for companies to manage currency risk through hedging and other strategies. Choices A, B, C, and E are incorrect as they do not accurately reflect the impact of fluctuating exchange rates on companies competing in foreign markets.

Which of the Following Statements Concerning the Effects of Fluctuating