FIN.13:5.1 - From a fixed invoice sensitivity to operating exposure

In a separate constructed export plan, all sales and costs settle at the end of the period. The business sells 100 units at 2 foreign units each and incurs 1 home unit of cash cost per unit. There are no other flows or tax effects. At 0.90 home per foreign unit, the net operating cash contribution is 100 × 2 × 0.90 − 100 = 80.

If quantity and the foreign price remain fixed while the exchange rate falls to 0.80, the contribution becomes 60. The transaction-price sensitivity is a loss of 20. That result follows from the foreign receipt of 200; it does not establish that demand and pricing will remain unchanged.

Suppose the actual operating scenario instead supports a foreign price of 1.90, sales of 110 units and the same home cost per unit. At 0.80, receipts are 110 × 1.90 × 0.80 = 167.20, costs are 110 and the contribution is 57.20. The loss relative to the first plan is 22.80. FIN.4 carries the supplied operating changes into the account; FIN.13 identifies why the invoice-only sensitivity missed their combined effect. If collection is delayed, this end-period contribution must also be returned to FIN.2 on the changed dates.