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Generally​ speaking, a firm wants to receive cash flows from a currency that is​ ________ relative to their​ own, and pay out in currencies that are​ ________ relative to their home currency.

2 Answers

6 votes

Answer:

The correct answer is letter "A": appreciating; depreciating.

Step-by-step explanation:

Companies prefer to operate in a currency that appreciates against its domestic currency because it implies, thanks to the exchange rate, after the translation that foreign currency will be converted into more money in the domestic currency.

On the other hand, they prefer to ay out in a currency that depreciates compared to the domestic currency since the foreign currency, in this case, will be the same or just slightly higher than the national currency, which makes transactions to be cheaper for the firm.

In the first case, the company will be profiting from the currency exchange proceeds but in the second case, it will just be saving money due to lower costs after currency conversions.

User Al Sutton
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3 votes

Answer:

Appreciating and Depreciating respectively

User Shilo
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