Question
What you do mean by transaction exposure? Describe various techniques available to manage transaction exposure both in the short term as well as the long term.
Answer :
Word Count : 613
Transaction exposure in international business finance refers to the potential risk that a company faces due to fluctuations in foreign exchange rates between the time a transaction is initiated and the time it is settled. When firms engage in cross-border trade, they often have receivables or payables denominated in foreign currencies. Any unexpected change in exchange rates during this period can alter the actual cash flows received or paid, thus affecting the company’s financial performance. For instance, if an exporter agrees to sell goods to a foreign buyer and receive payment in the buyer’s currency after three months, the exporter is exposed to the risk that the currency may depreciate against its home currency, reducing the value of its receivables. Hence, managing ___ ______ _____ _______ _____ ____ ____ ______.
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Transaction exposure in international business finance refers to the potential risk that a company faces due to fluctuations in foreign exchange rates between the time a transaction is initiated and the time it is settled. When firms engage in cross-border trade, they often have receivables or payables denominated in foreign currencies. Any unexpected change in exchange rates during this period can alter the actual cash flows received or paid, thus affecting the company’s financial performance. For instance, if an exporter agrees to sell goods to a foreign buyer and receive payment in the buyer’s currency after three months, the exporter is exposed to the risk that the currency may depreciate against its home currency, reducing the value of its receivables. Hence, managing ___ ______ _____ _______ _____ ____ ____ ______.
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