Question

Importance of management of translation exposure

Answer 1

Translation exposure, sometimes called accounting exposure, measures the effect of an exchange rate change on published financial statements of a firm. Foreign-currency assets and liabilities that are translated at the current exchange rate are considered to be exposed.

Answer 2

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Transaction exposure is the level of risk companies involved in international trade face, specifically, the risk that currency exchange rates will change after a company has already entered into financial obligations. A high level of exposure to fluctuating exchange rates can lead to major losses for firms