Economic exposure relates to:

A. The extent to which currency fluctuations can alter a company's future operating cash flows.
B. The risk that assets might be expropriated by a foreign government.
C. Exposure to hyperinflation or inflation risk.

Correct Answer: A

Economic exposure is the operating risk that a company bears resulting from fluctuations in foreign currency exchange rates. Cash flow risk arises, for example, in the reduction in cash receipts from accounts receivable denominated in foreign currency if exchange rates fluctuate.