Operating exposure for a firm is determined by the:
A)general performance of the currency markets.
B)time series of the values for the currencies in which it deals.
C)currencies in which it incurs costs and earns revenues.
D)policies of the firm with regard to risk-taking.

Question

Quizplus · Accepted Answer

Operating exposure refers to the risk of a firm's cash flows being impacted by changes in exchange rates. It is determined by the currencies in which the firm incurs costs and earns revenues. Therefore, choice C, which states that operating exposure is determined by the currencies in which a firm incurs costs and earns revenues, is the best choice. The other choices are not directly related to operating exposure, as the general performance of the currency markets (choice A) and the time series of currency values (choice B) can impact firms in general, while a firm's risk-taking policies (choice D) are not necessarily related to its exposure to currency fluctuations.

Operating Exposure for a Firm Is Determined by The