The effect of exchange rate fluctuations on a firm's future cost and revenues is termed as:

Correct option is D

Operating exposure arises when exchange rate fluctuations impact a firm’s future cash flows, costs, and revenues. It reflects long-term financial risks and often requires operational adjustments like diversifying production locations or sourcing strategies.
Information Booster: Firms with significant international operations face operating exposure due to uncertain costs and revenues in foreign currencies. Strategies like hedging and localization mitigate this risk.
Additional Knowledge:
· Transaction Exposure: Short-term risk from settling receivables/payables in foreign currency.
· Translation Exposure: Risk from converting foreign subsidiaries' financial statements into the parent company’s currency.
· Accounting Exposure: Another term for translation exposure.