Question

Find current issues on TWO of the areas covered this week (Transaction Exposure and Translation Exposure) and post a brief description of the issues and state your position on each issue.  Post links of the sources.

Answer 1

Transaction exposure is the risk involved in the currency exchange rates. Such risk is generally observed by the companies who are engaged in international trades and whose payment they receive in foreign currency. A high level of exposure to fluctuating exchange rates can lead to major losses for firms.

Translation exposure is the risk that a company's equities, assets, liabilities or income will change in value as a result of exchange rate changes. This occurs when a firm denominates a portion of its equities, assets, liabilities or income in a foreign currency. It is generally observed by the companies who has a subsidiary in the foreign country and who presents the consolidated financial statements in their home currency.

Following are the current issues related to the Transaction Exposure and Translation Exposure:-

High fluctuating currency rates due to economic slowdown. High level of fluctuations are seen in the currency exchange rates due to economic slowdown in almost many parts of the world including China and India. Many europen countries are on the verge of getting bankrupt. This all leads to losses for teh companies who deal in international trades.

High fluctuating currency rates due to increase in the crude prices and trade war between countries. Trade wars between countries like America and China leads to economic breakdown and high fluctuations in the exchange rates.