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Match the following scenarios with their corresponding types of exposure hedging. A U . S . - based company, ABC Corp, has a subsidiary in
Match the following scenarios with their corresponding types of exposure hedging.
A USbased company, ABC Corp, has a subsidiary in Japan. The subsidiary's financial statements are in yen, but ABC Corp reports its consolidated financial statements in US dollars. ABC Corp is concerned about the impact of exchange rate fluctuations when it converts the subsidiary's profits from yen to dollars.
GHI Co a US company, is considering investing in a new project. It's evaluating the project's potential return on investment and payback period.
Hedging Transaction Exposure.
Hedging Translation Exposure.
Hedging Economic Exposure.
XYZ Inc., a US company, imports raw materials from Europe and is worried about the cost increase if the euro appreciates against the US dollar. Theyfdecide to use a financial contract to lock in the current exchange rate for a future transaction.
DEF Ltd a UK company, exports its products worldwide. It's concerned that a strengthening pound could make its products more expensive and less competitive in international markets. It's considering diversifying its operations to other countries to mitigate this risk.
JKL Enterprises, a US company, is planning to issue new shares. It's analyzing the impact of this decision on its earnings per share.
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