Operating exposure
A) creates foreign exchange accounting gains and losses.
B) causes exchange rates to fluctuate.
C) is the possibility that future cash flows will change due to an unexpected change in foreign exchange rates.
D) measures a country's propensity to import and export.

Question

Quizplus · Accepted Answer

Operating exposure is the risk that a company's future cash flows will be impacted by changes in foreign exchange rates. This can happen due to factors such as changes in market demand, competition, or technology. It is different from transaction exposure, which refers to the risk of losses or gains arising from changes in exchange rates between the time a transaction is recorded and settled. Operating exposure can create foreign exchange accounting gains or losses, but it is not the same as them. It does not cause exchange rates to fluctuate or measure a country's propensity to import and export.

Operating Exposure