Foreign Exchange Risk Arises When

question 32

Multiple Choice

Foreign exchange risk arises when:

• A) business transactions are denominated in foreign currencies.
• B) sales are made to customers in a domestic country.
• C) goods or services purchased from suppliers in a foreign country are denominated in domestic currency.
• D) auditing reports are prepared in a foreign currency.

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Definitions:

Useful Life

The estimated duration of time that an asset is expected to remain productive or useful for its intended purpose.

Labor Savings

The reduction in the amount of labor (and consequently, labor costs) necessary to perform a particular task or produce a certain amount of goods or services.

Internal Rate

Typically referring to the internal rate of return (IRR), which is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Intangible Benefits

Advantages or positive outcomes of an action that are not quantifiable in monetary terms, such as customer satisfaction or employee morale.