At the end of 2020, an Italian subsidiary of a U.S. parent reports €1,000,000 in equipment purchased when  the exchange rate was $1.40, and €3,000,000 in equipment purchased when the exchange rate was $1.50.  The average exchange rate for 2020 is $1.35, and the beginning and ending rates for 2020 are $1.42 and  $1.31, respectively. If the Italian subsidiary’s functional currency is the U.S. dollar, the equipment account,  in U.S. dollars, is                   a. $5,240,000                    b. $5,350,000                   c. $5,400,000                   d. $5,900,000

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.