What type of international risk exposure measures the change in present value of a firm resulting from changes in future operating cash flows caused by any unexpected change in exchange rates?
A)Transaction exposure.
B)Accounting exposure.
C)Operating exposure.
D)Translation exposure.

Question

Quizplus · Accepted Answer

Operating exposure measures the potential impact of unexpected changes in exchange rates on the future operating cash flows of a firm, and how this will affect the present value of the firm. This exposure is not related to specific transactions or accounting practices, but rather reflects the overall risk that the firm faces from changes in exchange rates. Translation exposure refers to the impact of translating foreign financial statements into the reporting currency of the firm, while transaction exposure relates to the potential gain or loss from specific transactions denominated in foreign currencies. Accounting exposure is a broader concept that covers both translation and transaction exposure, as well as any other financial reporting impact from changes in exchange rates. Therefore, the correct answer is C) Operating exposure.

What Type of International Risk Exposure Measures the Change in Present