Which of the following statements is incorrect?
a. Transaction exposure represents only the exchange rate risk when converting net foreign cash inflows to U.S. dollars or when purchasing foreign currencies to send payments.
b. Economic exposure represents any impact of exchange rate fluctuations on a firm's future cash flows.
c. Firms can simply focus on hedging their foreign currency payables and/or receivables to hedge economic exposure.
d. The management of economic exposure tends to serve as a long-term solution rather than just a short-term solution.
Ans: c. Firms can simply focus on hedging their foreign currency payables and/or receivables to hedge economic exposure.
You might also like to view...
A merged corporation ceases to exist after the merger
Indicate whether the statement is true or false
When calculating the WACC it is common to include the estimated cost of accounts payable if a firm does not take the discount for early payment
Indicate whether the statement is true or false