Explanation:
To determine the potential negative impact of unfavorable exchange rate changes, we need to analyze the Cash Flow at Risk figures provided in the sensitivity analysis.
Cash Flow at Risk represents the potential negative impact on cash flows from unfavorable exchange rate movements.
Comparison:
Conclusion: The potential negative impact of an unfavorable change in the USD exchange rate (198 million GBP) is lower than the impact of an unfavorable change in the EUR exchange rate (304 million GBP).
Therefore, the correct answer is A - the potential negative impact of an unfavorable change in the USD exchange rate is lower than the impact of an unfavorable change in the EUR exchange rate.
Ultimate access to all questions.
29 A company based in the United Kingdom has significant operations in the United States and in Europe. It presents the following sensitivity analysis as part of its financial disclosures.
| USD | EUR | |
|---|---|---|
| Total exposure (in GBP millions) | 7,304 | 7,198 |
| Cash flow at risk (in GBP millions) | 198 | 304 |
The potential negative impact of an unfavorable change in the USD exchange rate is:
A
lower than the impact of an unfavorable change in the EUR exchange rate.
B
the same as the impact of an unfavorable change in the EUR exchange rate.
C
greater than the impact of an unfavorable change in the EUR exchange rate.
No comments yet.