The extent to which the firm's operating cash flows would be affected by random changes in exchange rates is called

Question

Quizplus · Accepted Answer

Operating exposure is the extent to which a firm's operating cash flows are affected by changes in exchange rates. Asset exposure refers to the impact of exchange rate fluctuation on the value of a firm's assets and liabilities denominated in foreign currency. Therefore, both options A and B can be considered correct, but only option B specifically relates to the effect on operating cash flows. Choice C is also correct but too general. Option D is incorrect as the question is specifically related to the impact on cash flows.

The Extent to Which the Firm's Operating Cash Flows Would