The Process of Matching the Liability Created by Borrowing Foreign

question 17

Multiple Choice

The process of matching the liability created by borrowing foreign currencies with the asset created by lending domestic currency by commercial banks is known as ________ the foreign exchange risk.

• A) Capitalizing
• B) Pegging
• C) Drifting
• D) Hedging

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Definitions:

Operating Leverage

The degree to which a company or project can increase operating income by increasing revenue, emphasizing the fixed versus variable costs structure.

Break-Even Point

The sales level at which a company neither makes a profit nor incurs a loss.

Degree Of Operating Leverage

A measure of how much a company's operating income can increase with a given increase in sales. It highlights the sensitivity of a company's operating income to changes in sales.

Percentage Change

A mathematical calculation that shows how much a quantity has increased or decreased as a percentage of its previous value, often used to measure growth rates or changes in financial metrics.