Question by John H: Which of the following firms is not exposed to translation exposure?
Which of the following firms is not exposed to translation exposure?
A) firm X, with a fully owned subsidiary that periodically remits earnings generated in Great Britain
to the U.S.-based parent.
B) firm Y, with a fully owned subsidiary that periodically generates foreign losses in Sweden; the
parent covers at least some of these losses.
C) firm Z, with a fully owned subsidiary that generates substantial earnings in Germany; the
subsidiary never remits earnings but reinvests them in Germany.
D) all of these firms are exposed to translation exposure.
Answer by Caliban
D. since all, will at some point, deal with exchange rate changes. In all cases, earnings of all subsidiaries affect the home firm’s profitability statement.
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