Question

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

Answer 1

The answer is  operating exposure.

Operating exposure relates to how exchange rate changes might affect a firm's future cash flows and, as a result, its value. Cash flows might be contractual or expected. The concept of an exposure without contracted cash flows might be difficult to understand.

The operating vulnerability of a corporation is largely driven by two factors: Are the marketplaces in which the corporation obtains its inputs and sells its goods competitive or monopolistic? Operating risk is increased when a company's input costs or product pricing are affected by currency volatility.

Therefore, the answer is operating exposure.

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