Question 1

**Section B - Case 3: GlobalCart**

*Scenario:* GlobalCart is a UK-based cross-border e-commerce company. Its functional currency is the British Pound (GBP). 
GlobalCart imports electronics from the US and exports them to Europe. 
The company expects to receive EUR 500,000 in 3 months from European customers.
It also needs to pay USD 300,000 in 6 months to its US suppliers.

**Question:**
The risk that the GBP value of the EUR 500,000 receipt will fall between now and the settlement date in 3 months is known as what type of risk?

Accepted Answer

Identify the type of foreign exchange risk that arises from short-term, specific cash flows (receivables and payables).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Confusing transaction risk with translation risk (which is purely an accounting consolidation issue).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FM — Financial Management Practice Exam 1

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