18.3 Transaction, Operating, and Translation Exposures
If you manage a business, one of the first things that you will realize is that customers often pay for a product or service long after they receive it. A major current asset of many businesses is accounts receivable, the anticipated payment for products that they sell or services that they render. In a domestic-only company, you can manage this asset with some basic short-term cash management tools, but when a foreign operation is involved, you face the added problem of fluctuating exchange rates.
Two problems can arise. First, anticipated cash inflows may fall in value if unexpected movements in the exchange rate hurt your ability to convert the foreign currency into domestic currency. ...
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