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You are an American, working for a US hospital. The hospital sells services to a French...

You are an American, working for a US hospital. The hospital sells services to a French hospital. Given a depreciation of the Euro, your French subsidiary (the one that receives the revenues from the French Hospital) received a lesser income last year, although a clause in your contract stipulates adjustment payment in US dollars. Therefore, your subsidiary has a balance sheet loss, although your consolidated global result is positive. This type of foreign exchange risk is known as:

financial exposure.

translation exposure.

transaction exposure.

economic exposure.

business   economics   
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Answer #1

Answer is option b)

Translation exposure

A company with subsidiary in foreign nations is exposed to translation exposure risk .

So translation risk is quite evident in multinational organisations, since a part of operations & assets of these companies is in form of foreign currencies

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