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ABC, Inc. has a foreign subsidiary in a country that is prone to instability. Since ABC is unable to divest this subsidiary, they are essentially
ABC, Inc. has a foreign subsidiary in a country that is prone to instability. Since ABC is unable to divest this subsidiary, they are essentially forced to do business in this country despite the potential for instability. The increased volatility of the subsidiary's cash flows, and the resulting impact on consolidated financial statements, takes its toll on ABC in the form of eroding shareholder wealth. This is an example of:
A. | Economic exposure |
B | Translation exposure |
C | Transaction exposure |
D | Corporate hedging policy |
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