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mash [69]
3 years ago
12

Transaction exposure and operating exposure exist because of unexpected changes in future cash flows. The difference between the

two is that ________ exposure deals with cash flows already contracted for, while ________ exposure deals with future cash flows that might change because of changes in exchange rates.
Business
1 answer:
harina [27]3 years ago
8 0

Answer:

Transaction exposure deals with cash flows already contracted for, while operating exposure deals with future cash flows that might change because of changes in exchange rates

Explanation:

Transaction exposure deals with changes in cash flow due to default of counter party in making the amount  promised available to our business at the contracted time.This would necessitates looking elsewhere for short-term funding,should the default arises.

On other hands,operating exposure results from fluctuation in exchange rate.If domestic exchange rate strengthens,the local equivalence of a foreign currency receivable in future reduces,hence the shortfall is due to operating exposure.

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