Baker Adhesives Foreign Exchange: Case Study

The Balance of Payments in India mainly relies on services exports, remittances and the course capital flows, both foreign direct investments (FDI) and FII. It is very essential that all market participants, such as banks and other intermediaries be provided with the wherewithal so that they can undertake a risk management in a way that is scientific. One of the ways to access domestic, foreign exchange markets is to hedge on the underlying foreign exchange exposures. In addition, the facilities that are available as the booking of forward contracts were included in the domestic forex market in order to evolve and acquire volumes and depth (Sumanth, 2012). Some of the newer hedging instruments have put in place swaps and options in the

In accordance with our agreement of this date you will deliver the one thousand previously ordered widgets within thirty

The average lead time of a corporation is 15 weeks from production to consumption. Benchmark firms have a lead time of 8 weeks which is the goal for the supply chain (Heizer & Render 2010). The 8 week number will be achieved by analyzing opportunities to streamline the process thereby creating efficiencies and driving down the amount of time it takes to produce and ship products. Setting a goal for an 8 week lead time will give the firm an opportunity to assess their forecasting and production capabilities presenting a way to identify and address inefficiencies.

Currency exposures assume many forms: they can be assets or liabilities; current or committed; contracted or merely forecast; they can be for trade, investment or balance sheet purposes. Cases of currency exposure can emerge at any point along the value chain, with various repercussions. Each requires a transfer of funds, and for each the rate of exchange is uncertain. Examples of different types of currency exposures are presented below.

There are lots of methods to solve the changes in foreign currency and interest rates issue, however, derivative financial instruments are the major tunes Nike enterprise has used to tackle this issue. Despite the fact that this approach does not wipe out comprehensively the risk of foreign exchange, Nike enterprise still utilize it to minimize or delay the negative consequences. Specifically, the derivative financial instruments comprise embedded derivatives, interest rate swap, and foreign exchange forwards and options contracts (Nike annual report, 2014).

The presentation was scheduled for the first week of December 1990. Mr. Pross outlined the use of various derivatives, noting that they differed widely in their ability to reduce risk. If the company was, say, placing a large bid to buy a building abroad, one might prefer to use foreign currency options to hedge the currency risk in the event the deal fell through. He argued, however, that foreign currency futures were best suited to hedge the fluctuations in revenues arising from currency movements. Mr. Pross proposed a plan to hedge currency risk using futures which

The purchase order is the root to the problems in the plant that morning. Peach is incredibly upset because the order is not only seven weeks late but the order 41427 is for one of the biggest clients of the plant. Rogo starts to see the issue on page 3 of our text when Peach sits down and tells him the customer had complained very angrily the night before. Promising the customer his word he set out to disrupt the plant this morning to get the order shipped out. According to Woods Hole Oceanographic Institution a purchase order is a “legally binding document between a supplier and a buyer. It details the items the buyer agrees to purchase at a certain price point. It also outlines the delivery date and terms of payment for the buyer.” The reason the purchase order is so important is because it keeps track of what was bought and the agreement the company has with the buyer. When the agreement is not met like a late delivery it has cause to make the buyer upset such as our buyer in the

There is also risk of volatility with respect to exchange rates in the short and long term

Stanek, M. B. (2002). A review of exchange rate policies and their effect upon nations and

Forward contract. Lock in an exchange rate with the bank until a certain future date, with currency projections against the spot rate though.  In this case had an option to have Forward contracts, which allow Nodal fixed exchange rates in the future at no charge, the bank may impose a fee

Given the nature of its business, Jaguar is faced with three types of exchange rate exposure (1) Transaction, (2) Translation and (3) Economic . Transaction exposures arise whenever the firm commits (or is contractually obligated) to make or receive a payment at a future date denominated in a foreign currency. Translation exposures arise from accounting based changes in consolidated financial statements caused by a change in exchange rates. In this case we primarily focus on the Economic exposure -also known as Operating exposure or Competitive exposure- of Jaguar.

Then, we took into consideration only a fluctuation of the exchange rate. The scenarios that we analyzed covers different positions of the dollar against the euro: weak dollar (USD 1,48/EUR), stable dollar (USD 1,22/EUR) and strong dollar (USD 1,01/EUR). Different coverage of costs with hedging was also introduced in the analysis. The three main policies are of not hedging, 100% hedging with forward contracts and 100% hedging with options.

This report is created with a discussion over several important international finance topics for instance, interest-rate parity, currency risk management, regarding description on Carrefour S.A. financing policies as well as hedging strategy. Additionally, we also discussed on which currency Carrefour should issue its 10-year, 750 million euro, annual coupon bond, its foreign currency risk exposure and a possible hedging decision in dealing with any or all of the identified risks.

Even though Custom Molds has the capacity to produce 5,000 parts per day in the injection-molding department, the lead time for handling orders in this department has averaged one week. This reflects the department's inability to fully utilize the company's production output capability to accelerate the delivery time based on production.

Great Eastern Toys is a company in Hong Kong that exports a huge percent of its total sales to the North American and European markets and hence is exposed to currency risk. Previously, the company was occupied with expanding their business and the company 's management had never given much attention to currency risk until their recent meeting with their banker. The banker pointed out that the depreciation of the European currencies during the previous two years had resulted in a substantial loss of income. The company 's management was indeed convinced that they should begin to devote more time and manage their currency position. In this report, we are going to explore the different options for Great Eastern Toys to hedge