Suppose the future anticipated cash flows of a foreign business produce less domestic currency upon conversion.This problem in the reduction in the value of future cash flow from operations is called ________.

Question

Quizplus · Accepted Answer

This problem is referred to as operating exposure, which refers to the potential changes in a company's cash flow due to changes in exchange rates that affect the future cash flows from operations. Cash flow exposure (A) refers to changes in future cash flows due to changes in exchange rates from either transaction or operating activities, while transaction exposure (B) refers to the risk associated with foreign currency exchanging due to fluctuations in exchange rates. Asset exposure (C) does not accurately describe the situation described in the question.

Suppose the Future Anticipated Cash Flows of a Foreign Business