Conversion and competitive effects of exchange rate changes
Discuss the conversion and competitive effects of exchange rate changes on the firm’s operating cash flow.
Expert
Competitive effect : In this, exchange rate changes will affect the operating cash flows by altering the firm’s competitive position.
Conversion effect : Given operating cash flows in terms of the foreign currency may get converted to the lower or higher dollar (home currency) amounts since the exchange rate changes.
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Source: O'Conner, G. C., T.R. Willemain, and J. MacLachlau, 1996. "The value of competition among agencies in developing ad compaigns: Revisiting Gross's model." Journal of Advertising 25:51-63. Modeling Cases
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