Question

If a firm does not have foreign subsidiaries, it is not subject to ____. a. transaction exposure b. economic exposure c. A and B d. translation exposure

Answer 1

The correct answer is letter "D": translation exposure.

Step-by-step explanation:

Translation exposure is the risk companies are subject to while having assets and liabilities in a foreign currency. The fluctuations in the exchange rate may make those assets and liabilities gain or lose value. For accounting purposes, translation exposure is recorded as exchange rate gains or losses. Accountants implement diverse consolidation and costing methods to mitigate risks.

Answer 2

Translation exposure.

Step-by-step explanation:

Translation exposure bis also known as translation risk and is the risk faced by a company in case it's equity, asset, liabilities, or income is affected by exchange rates. This is usually the case when a firm has part of its assets.or equity denominated in a foreign currency.

Companies that have foreign subsidiaries are subject to this type of risk. For example if after a company has undertaken an obligation at a particular price and foreign currency fluctuations cause the cost of execution to go up. The company still has to meet its obligations and will run at a loss.