Slide 25 of
32
Slides developed by Jeff Madura, with
additions and enhancements by Tim Richardson
Economic Exposure:
Measurement
Measurement
uAssess
sensitivity of earnings to exchange rate fluctuations
–sort
income statement items by currency
–project
future values from estimated rates
–conduct
sensitivity analysis on estimates
A firm is relatively insulated from
exchange rate movements
if costs and revenues are affected by
similar magnitudes.
