Which of the following is not true a Economic exposure is th

Which of the following is not true? a. Economic exposure is the degree to which a firm\'s present value of future cash flows can be influenced by exchange rate fluctuations. b. Transaction exposure is the degree to which the value of future cash transactions can be affected by exchange rate fluctuations. c. Economic exposure includes transaction exposure. d. Translation exposure is the exposure of an MNC\'s consolidated financial statements to exchange rate fluctuations. e. All of the these choices are true. O O O O

Solution

Answer: C Economic exposure includes transaction exposure.

All the remaining answers are correct, since economic exposure is the degree to which a firm\'s present value of future cash flows can be influenced by exchange rate fluctuations and transaction exposure is said to take place when the future transactions in cash are impacted by changes in exchange rate. Similarly Translation exposure occurs due to currency fluctuation impacting the financial statements containing various stock, investments etc.

Economic exposure does not include transaction exposure.