 # Exchange Rate vs Operational Effect

This just popped into my head and it’s bothering me because I can’t remember the formula to calculate exchange rate and operational Flow Effect on a single I.S. item. Isn’t it something like: Exchange Rate Effect = (Change in IS item)*(Avge Exch. Rate t-1) using Direct quote Operational Effect = (Beginning value IS item)*(Change in Avge Exch. Rate) ?? Also, how do you calculate the Holding G/L effect on a single B.S. item?

B.S Holding = beg exposure * (ending rate - beg rate) BS Flow = Change in expsure * (ending- avg) Exposure AC = Equity temporal = (cash + AR)- (short and LT debt)

McLeod81 Wrote: > Exchange Rate Effect = (Change in IS item)*(Avge > Exch. Rate t-1) using Direct quote > > Operational Effect = (Beginning value IS > item)*(Change in Avge Exch. Rate) actually you should swap formulas for operational effect and exchange rate effect.

Not cool. I was remembering what McLeod81 posted. A question like this you can easily refer to your books instead of asking the forum.

thepinkman Wrote: ------------------------------------------------------- > B.S Holding = beg exposure * (ending rate - beg > rate) > BS Flow = Change in expsure * (ending- avg) > > Exposure > AC = Equity > temporal = (cash + AR)- (short and LT debt) Those formulas are for total BS and IS exposure, I have seen questions asking for the exposure for individual BS and IS items. What I was asking is whether or not there is another formula for calculating the exposure for an INDIVIDUAL item (such as inventory, COGS, fixed assets, AR, etc).

Here is what you are looking for: Exchange rate effect: income statement item X change in the average rate Operational effect: change in income statement item X previous period’s average rate if you stare at it and think about it for a minute, it becomes pretty intuitive edit: forgot to add change in income statement item for operational