Anticipated Cash Inflows May Fall in Value If Unexpected Movements

question 71

Multiple Choice

Anticipated cash inflows may fall in value if unexpected movements in the exchange rate hurt your ability to convert the foreign currency into domestic currency.This reduction in the conversion of future payments is called ________.

• A)translation exposure
• B)transaction exposure
• C)conversion exposure
• D)operating exposure

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Definitions:

Preparing Closing Entries

The procedure of transferring all income statement balances to permanent accounts at the end of an accounting period to prepare for the next period.

Fiscal Year

A one-year period that companies use for financial reporting and budgeting, which does not necessarily align with the calendar year.

Accounting Period

A specific period of time used by businesses to calculate their financial results and prepare financial statements, such as a month, quarter, or year.

Calendar Year

A period of one year that begins on January 1 and ends on December 31, used as an accounting period by many businesses.