Scenario - The Gayla Corporation
The Gayla Corporation is a multinational business that conducts operations in twelve foreign markets.This multi-million dollar organization is very familiar with currency exchanges and has considerable understanding when it comes to the risks associated with operating in the global market arena.The Gayla Corporation claims it would not be as successful without the expertise of the financial wizards that work for it.The company has not lost money so far and plans to stay that way.
-The Gayla Corporation must fully understand and effectively handle all the ways in which long-term exchange rate movements affect the firm.Which of the following best identifies what this organization is facing in this situation?

Question

Quizplus · Accepted Answer

The situation described pertains to economic risk, which is the risk that currency fluctuations can impact a company's future cash flows and profits. The Gayla Corporation's multinational operations expose it to economic risk, which it must manage and mitigate to maintain its success. The other options, beta risk, transaction risk, hedging, and translation risk, while important to global businesses, do not accurately reflect the situation faced by the Gayla Corporation as described.

Scenario - the Gayla Corporation