Question

Change in the value of the firm resulting from unexpected changes in exchange rates altering the...

Change in the value of the firm resulting from unexpected changes in exchange rates altering the value of future operating cash flow is called

Group of answer choices

transaction exposure

economic exposure

translation exposure

accounting exposure

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Answer #1

Correct answer is economic exposure

Explanation:- Economic exposure also called operating exposure means the change in present value of firm due to the Change in future sales volume ,prices and costs because of unexpected change in exchange rates and hence causes change in future operating cash flows.

Accounting exposure also called Translation exposure means change in value of assets and liabilities during Translation of financial statements from foreign currency to home currency of firm.

Transaction exposure means change in receivable or payables amount at the time of settlement because of change in excahnge raterate at the time of settlement

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