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- Title
Foreign Exchange Operating Exposure: A Practical Teaching Approach.
- Authors
McCarthy, Scott
- Abstract
This paper serves as a pedagogical tool to assist students to understand the challenging concept of foreign exchange operating exposure. Operating exposure refers to how exchange rate changes can impact on a firm ’s future cash flows and consequently affect the firm ’s value. The cash flows may be contractual or anticipated. The idea of an exposure without contracted cash flows can prove a difficult concept to grasp. Equally difficult to comprehend, unlike transaction and translation exposure, operating exposure can impact on firms that do not themselves have foreign currency dealings; they may feel the impact indirectly through their market competition. From experience with graduate and MBA students, a theoretical introduction followed by a comprehensive example applied to a real multinational company has proven successful in facilitating student learning.
- Subjects
FOREIGN exchange; CASH flow; FOREIGN exchange rates; FOSTER'S Group Ltd.; AUSTRALIAN dollar
- Publication
Journal of Financial Education, 2016, Vol 42, Issue 1/2, p116
- ISSN
0093-3961
- Publication type
Article