Case Study Of Pick N Pay And Woolworths

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Chapter 4
Introduction:
This section displays the exploration discoveries to the research on the impact of foreign exchange fluctuations on a business financial position and ability to invest. The examination was directed at 2 firms as a multiple case study, Pick n Pay and Woolworths Holdings where both companies have direct relations with foreign currency within their respective companies. These companies were presented with a survey which appear in the reference and appendix D. Out of the 2 respondents, 2 filled and restored their surveys which make a 100% reaction rate. The honourable reaction rate was accomplished after the analyst directed the polls by and by and influenced individual visits to both companies and phoned to remind the
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Foreign exchange risk arises from commercial transactions, recognised assets and liabilities and net investments in foreign operations. It is the Woolworths policy to fully cover all committed exposures, except net investments in foreign operations.
The Woolworths has transactional currency exposures arising from the acquisition of goods and services in currencies other than its functional currency. This creates a risk to business expansion but also have an impact on the growth in other departments. It is the Group‘s policy that business units entering into such transactions must cover all such exposures with forward exchange contracts to hedge the risk of fluctuation in the foreign currency exchange rate (refer to the accounting policy note on hedge accounting). Forward exchange contracts and trade payables at year-end.
In order for Woolworths to grow their business they acquired the Australian retailer David Jones. They for this acquisition they had to pay in Australian Dollars. When there were a depreciation in the value of the Rand which made it difficult for Woolworths to invest in their foreign operations or even other

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