TRANSLATION EXPOSURE

Foreign exchange exposure refers to:

• The risk caused by inflation only

• The risk arising from interest rate changes only

• The risk arising from activities involving foreign currencies

• The risk of poor employee performance

A firm is said to have foreign exchange exposure when:

• It sells only in the domestic market

• Its future cash flows depend on foreign currency values

• It has no foreign customers

• It uses only local suppliers

Which of the following is a type of foreign exchange exposure?

• Operational exposure

• Staffing exposure

• Political exposure

• Translation exposure

Translation exposure is also known as:

• Accounting exposure

• Cash exposure

• Operating exposure

• Market exposure

Translation exposure arises when:

• A firm receives foreign cash immediately

• A firm produces goods in the home country

• A firm translates foreign subsidiary statements into home currency

• A firm changes its management team

Which exposure affects consolidated financial statements the most?

• Translation exposure

• Transaction Exposure

• Economic exposure

• Operating exposure

Under the current/non-current method, current assets are translated using:

• Historical rate

• Average exchange rate of the next year

• Current exchange rate

• Purchasing power parity rate

Under the current/non-current method, non-current assets are translated using:

• Current rate

• Historical rate

• Forecast rate

• Average monthly rate