Question

Foreign exchange risk arises when:

a. goods or services purchased from suppliers in a foreign country are denominated in domestic currency.
b. business transactions are denominated in foreign currencies.
c. auditing reports are prepared in a foreign currency.
d. sales are made to customers in a domestic country.

Answer 1

Business transactions are denominated in foreign currencies.

Step-by-step explanation:

Foreign exchange can be referred to as the exchange of one country's currency for another currency. The exchange of these currencies occurs in an exchange market known as forex market.

Foreign exchange risk is a financial risk in which changes in the exchange rate may result in the loss of investment value or huge financial breakdown.

The most effective approach to preventing foreign exchange risks is for organizations to make and receive all forms of payment in their own currency.