Transaction exposure and operating exposure differ in that transaction exposure:
A) derives from a company's foreign-currency-denominated cash flows, and operating exposure applies to the impact of exchange rate volatility on the value of the assets and liabilities of a company's foreign operations.
B) derives from a company's foreign-currency-denominated cash flows, and operating exposure applies to the impact of exchange rate volatility on future cash flows.
C) derives from a company's foreign-currency-denominated cash flows, and operating exposure applies to the impact of exchange rate volatility on foreign operations.
D) applies to the impact of exchange rate volatility on future cash flows, and operating exposure applies to the impact of exchange rate volatility on foreign operations.

Question

Quizplus · Accepted Answer

Transaction exposure is related to the effect of exchange rate changes on a company's foreign-currency-denominated transactions, such as receivables and payables. Operating exposure, also known as economic exposure, refers to the impact of exchange rate fluctuations on a company's future cash flows, including revenues and expenses, beyond those financial transactions.

Transaction Exposure and Operating Exposure Differ in That Transaction Exposure