Which of the Following Statements Is Incorrect

question 42

Multiple Choice

Which of the following statements is incorrect?

• A) Transaction exposure represents only the exchange rate risk when converting net foreign cash inflows to U.S. dollars or when purchasing foreign currencies to send payments.
• B) Economic exposure represents any impact of exchange rate fluctuations on a firm's future cash flows.
• C) Firms can simply focus on hedging their foreign currency payables and/or receivables to hedge economic exposure.
• D) The management of economic exposure tends to serve as a long-term solution rather than just a short-term solution.

---

Definitions:

Benchmarking

The process of comparing one's business processes and performance metrics to industry bests or best practices from other industries.

Financial Ratios

Quantitative measures derived from financial statements used to evaluate a company's financial performance and condition.

Cash Flow Management

The process of monitoring, analyzing, and optimizing the net amount of cash receipts minus cash expenses in a business.

Accounts Receivable

Funds that customers owe to a business for products or services already provided but not yet compensated for.