When exchange rates change,

Question

Quizplus · Accepted Answer

Exchange rate changes can affect all of the options mentioned. A change in exchange rates can lead to changes in the operating cash flow of a domestic firm that trades internationally, as their revenues and expenses will fluctuate with changes in exchange rates. A change in exchange rates can also affect a domestic firm's competitive position against foreign firms, as the relative prices of goods and services can change. For a multinational firm, exchange rate changes can affect the valuation of their assets and liabilities denominated in different currencies. Therefore, all of the options are correct.

When Exchange Rates Change