The type of risk in which the value of liabilities and assets is affected by the exchange rate is classified as ____________?
Correct answer: B. foreign exchange risk
- A. economic rates
- B. foreign exchange risk
- C. selling rate
- D. buying rates
Explanation
Foreign exchange risk is the possibility that exchange-rate movements will change the value of assets, liabilities, or cash flows denominated in another currency. The other options refer to rates or vague terms rather than the risk itself.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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