Exam 12: Operating Exposure

Most swap dealers arrange swaps so that each firm that is a party to the transaction knows who the counterparty is.

The higher the price elasticity of demand,the higher the degree of pass-through.

For a firm that competes internationally to sell its products,a depreciation of its domestic currency relative to markets where the firm exports goods,should eventually result in ________ sales at home and ________ sales abroad,other things equal.

Which of the following is NOT an example of a form of political risk that might be avoided or reduced by foreign exchange risk management?

A ________ resembles a back-to-back loan except that it does not appear on a firm's balance sheet.

A U.S.timber products firm has a long-term contract to import unprocessed logs from Canada.To avoid occasional and unpredictable changes in the exchange rate between the U.S.dollar and the Canadian dollar,the firms agree to split between the two firms the impact of any exchange rate movement.This type of agreement is referred to as:

The goal of operating exposure analysis is to identify strategic operating techniques the firm might adopt to enhance value in the face of unanticipated exchange rate changes.

Which of the following is NOT an example of a financial cash flow?

Another name for operating exposure is ________ exposure.

Recently the British Pound suffered an unexpected depreciation in value.Which of the following actions being considered by Coventry Furniture of London,a purely domestic furniture manufacturer and retailer,would be considered a highly unlikely response to the depreciation of the pound?

________ exposure is far more important for the long-run health of a business than changes caused by ________ or ________ exposure.

Swap agreements are treated as off-balance sheet transactions via U.S.accounting methods.

Even though contracts are often fixed in the short run,as time passes,prices and costs can be changed to reflect the new competitive realities caused by a change in exchange rates.

An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by paying for imports from Canada in Japanese yen.This hedging strategy is known as:

When disequilibria in international markets occur,management can take advantage by:

A British firm has a subsidiary in the U.S. ,and a U.S.firm,known to the British firm,has a subsidiary in Britain.Define and then provide an example for each of the following management techniques for reducing the firm's operating cash flows.The following are techniques to consider: a)matching currency cash flows b)risk-sharing agreements c)back-to-back or parallel loans

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?

Which of the following is NOT identified by your authors as a proactive management technique to reduce exposure to foreign exchange risk?