How do exchange rates affect businesses?

In two ways.

First, direct impact. This will happen in three cases:

1. If the business buys any products from another country. The cost of those products will change if the exchange rate changes.
2. If the business sells any products to a foreign country. The sale price (and therefore profits) will change if the exchange rate changes.
3. If the business has borrowed money from, or lent money to, someone in a foreign country. The amount to be repaid, and the interest amount, will change if the interest rate changes.

That was the direct impact. There is also an indirect impact. No business is an island - it depends upon other businesses which might be affected by exchange rates. For example, a UK business which neither sells nor buys nor borrows from another country. However, it uses trucks to move it's products around the country. If the foreign exchange rate changes, the cost of the fuel those trucks use changes (because it is imported from abroad) and that affects the costs of the business … this is an example of indirect impact.