Economic exposure occurs at the operations level and results from:

Question

Quizplus · Accepted Answer

Economic exposure refers to the risk of exchange rate fluctuations on a firm's future cash flows, revenues, and expenses. It occurs at the operational level since it reflects the impact of currency movements on a company's ongoing business activities, such as the costs of inputs, pricing strategies, and market demand. Poor decision-making, higher tax rates, and transaction risks are all examples of operational risks that can affect a firm's performance, but they do not necessarily represent economic exposure.

Economic Exposure Occurs at the Operations Level and Results From