Key Questions to Ask That Help Identify
These three examples illustrate a progression of ideas. Aspen Skiing Company’s revenues were affected by exchange rate changes, but its costs were largely unaffected. By contrast, Pemex’s costs, but not its revenues, were affected by exchange rate changes. Toyota had both its costs and its revenues affected by exchange rate changes. The process of examining these companies includes a systematic approach to identifying a company’s exposure to exchange risk. Exhibit 11.6 summarizes this approach by presenting a series of questions that underlie the analysis of economic exposure.