Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Interest rate risk: Our long-term debt bears interest predominately at fixed rates, whereas our short-term borrowings are at variable interest rates.

Our cash and cash equivalents balances earn interest at variable rates. At March 31, 2022 and 2021, we had $3.5 billion and $6.3 billion, respectively, in cash and cash equivalents. The effect of a hypothetical 50 basis points increase in the underlying interest rate on our cash and cash equivalents, net of short-term borrowings, would not have resulted in a material impact to earnings in 2022 or 2021.

Foreign currency exchange rate risk: We conduct our business worldwide in U.S. dollars and the functional currencies of our foreign subsidiaries, including Euro, British pound sterling, and Canadian dollar. Changes in foreign currency exchange rates could have a material adverse impact on our financial results that are reported in U.S. dollars. We are also exposed to foreign currency exchange rate risk related to our foreign subsidiaries, including intercompany loans denominated in non-functional currencies.

We have certain foreign currency exchange rate risk programs that use foreign currency forward contracts and cross-currency swaps. The forward contracts and cross-currency swaps are intended to reduce the income statement effects from fluctuations in foreign currency exchange rates and have been designated as cash flow hedges. These programs reduce but do not entirely eliminate foreign currency exchange rate risk.

As of March 31, 2022 and 2021, the effect of a hypothetical adverse 10% change in the underlying foreign currency exchange rates would have impacted the fair value of our foreign exchange contracts by approximately $122 million and $267 million, respectively. However, our risk management programs are designed such that the potential loss in value of these risk management portfolios described above would be largely offset by changes in the value of the underlying exposure. Refer to Financial Note 15, “Hedging Activities,” for more information on our foreign currency forward contracts and cross-currency swaps.

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McKESSON CORPORATION

In July 2021, we announced our intention to exit our businesses in Europe. During 2022, we entered into an agreement to sell certain of our businesses in the European Union which is anticipated to close within the second half of fiscal year 2023. We also completed the sale of our Austrian business during 2022 and, on April 6, 2022, we completed the sale of our retail and distribution businesses in the United Kingdom. Refer to Financial Note 2, “Held for Sale,” to the consolidated financial statements included in this Annual Report for more information on these divestitures. Subsequent to the completion of these divestitures, our foreign currency exchange rate risk will be primarily limited to the Canadian dollar.

The selected hypothetical change in interest rates and foreign currency exchange rates does not reflect what could be considered the best or worst case scenarios.

McKESSON CORPORATION