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Essay / Research Paper Abstract
This 3-page paper focuses on various terms of financial risk such as transaction, translation and economic exposure. These concepts are defined in terms of Canada. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTfincan.rtf
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Unformatted sample text from the term paper:
on include trance action exposure; translation exposure and economic exposure. Transaction exposure involves the extent to which income from transactions is impacted
by currency fluctuations; translation exposure focuses on impact of currency exchange rates on consolidated results and balance sheets; while economic exposure involves the effect of changing exchange rates on future
prices. Transaction One way in which transaction exposure can be minimized, at least in the private sector, is to rely on hedging
techniques in order to avoid having to pay fluctuating exchange rates (Anonymous). Hedging would involve converting currency into a more stable rate, with the idea that the stable rate would
be stronger than a fluctuating exchange rate (Anonymous). In other words, our Canadian company, and an attempt to minimize transaction exposure, would
work to convert foreign currency that is unstable into a more stable currency, at least on the balance sheet. For the most part, that conversion would involve the movement
into Canadian currency -- however, given a wide fluctuations of the Canadian dollar as of late, the Canadian dollar may not necessarily be the most stable in the company can
use. In this way however, hedging and conversion means less impact on profits because of volatile exchange rates. Translation Translation exposure
occurs because the potential impact as financial data from other countries is translated to the home currency (South-Western College). This can cause some confusion -- as exchange rate movements can
happen dire impact on currency (South-Western College). Again, experts recommend hedging to reduce translation exposure (South-Western College). Forward contracts for example, means the risk of currency fluctuations is
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