Case Study Of Possum Products

The exchange rates risk that is associated with economic, transaction, and translation exposure in Indian market. From the analysis, anticipate the fluctuations that seem to occur in the next 24 months

Foreign exchange rate risk is also one of the main problem investing in emerging markets. Fluctuation often happens in emerging countries. Foreign investors could face losses because when they convert the currencies to their local currencies, they will not gain the profit that they expected. Therefore, currency fluctuations can impact the total return of investment. Meanwhile, developed countries usually have strong currencies. Which can also be a problem for foreign investor who happens to be from an emerging market to invest, since the product/service would be a lot more expensive than their local currencies.

Currency risk is the potential risk of loss from fluctuating foreign exchange rates when an investor has exposure to foreign currency or in foreign-currency traded investments.

Fluctuations in foreign exchange rates may have an adverse impact on profitability and cause cash flow to be somewhat unpredictable for budget planning purposes.

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

dollars, since shareholders want to have returns on U.S. currency. Several factors distinguished financial management by domestic firms from multinational corporations by different currency, and different economic and legal structures. It’s important to understand direct quotation, and indirect quotation which might affect the company’s overall revenue. Since, the currency of the dollar changes, it might require higher rates on foreign projects. We need to take into consideration political risk and exchange rate risk. Since, government actions can decrease the value of the investment. Or generate losses due to fluctuations in the value of the

The performance of a stock market is usually associated with the movements in the exchange rate because of its influence on the stock price of a firm. The foreign exchange market is a place where trading of international currencies occurs between many buyers and sellers around the world. Any fluctuations occur in the currency rate can influence the business activities between two different countries. For example, a strong home currency can leads to the firm’s profit when doing business in the country which have a weak currency rate.

The first is transactional risk, which is defined as transactions that lose value due to unfavorable fluctuations of the exchange rate resulting in potential losses for CCE. Our expenses and revenues are not always incurred in the same currencies. We have predetermined profit margin thresholds, and those margins can erode rapidly when the currency we incur our expenses appreciates, or the currency in which we earn our revenue depreciates.

These rates also offer corporations opportunities for profit as they can order items expecting to pay when the exchange rate has changed in their favor. Let's consider an American company operating in France. The company's accounting statements are kept in U.S. dollars. The company orders equipment from a French supplier that is expected to cost 85,000 French francs. If the company pays for the equipment now, the books will indicate a cost of 100,000 U.S. dollars. If the company waits for the equipment to arrive and pays for the equipment in three months, the cost will be over 106,000 U.S. dollars. This is known as hedging - using the expected exchange rate to increase profits or reduce losses by timing monetary exchanges.

However, there are also some disadvantages or risks inherent in overseas financing, the principal of which is the company’s exposure to currency risk (assuming the bonds have to be repaid in the foreign currency). Should the exchange rate between HKD and the currency of issuance be volatile, there would be significant financing cash flow uncertainty for the firm.

Strong global growths from United States’ companies tend to produce better returns to shareholders. However, the United States has suffered from a slow growth. Therefore global expansion has become an essential strategic support for many companies. Regardless of the risk, uncertainties, other obstacles that come with international expansion, there are rewarding benefits that out shine the risk. Benefits include an overall revenue growth at an accelerated pace, diversified stream of revenue, and improved return on capital. Lastly, international growth is more valuable to shareholders. Not only for the countries whose markets are already developed but also for emerging markets. Many are less developed so increased growth is forecasted to remain lofty for longer periods of time.

As an International trade corporation, we buy goods in foreign countries and sell it to other countries for a price difference and so to gain profit. The cost of purchasing goods in foreign countries are the majority part of our cost. The cost of purchasing goods in a foreign would fluctuate as the exchange rate of that country fluctuate. Most of times, one country’s exchange rate can be very volatile in the short term. Sometimes it is beneficial to our profit but sometimes it can cause increasing in our cost. When the exchange rate went to the direction that we don 't want it to be, the price difference advantages we have gained from purchasing goods in foreign countries would be eroded and it would eventually hurt our profit from selling goods in our country or other countries.

Those organizations wishing to engage in international business transactions have many elements they must consider. One of these elements is that of foreign exchange rates, the rate at which one currency can be converted into another (Hill, 2014, p. 296). While a company may be located in the United States, they may engage in commerce with organizations in foreign markets that require payment in their domestic currencies. Organizations must pay careful attention to these exchange rates, as their fluctuations can significantly impact the costs of doing international business, as demonstrated in the first section. While exchange rates are determined by the supply and demand of currencies on the foreign exchange market

In the restaurant business there is a household name that controls a big part of the market share and has experienced a tremendous growth since it was founded in the 1940’s. McDonald’s growth has not just been in the United States but has grown rapidly grown in the global market. McDonald’s has adapted their business model to global environments by maintaining consistent accounting standards. Reporting debt securities, common stock, equity, and any financial activities on financial statements is a common practice by the McDonald’s corporation which has assisted them to plan

The main consequence of an exchange rate fluctuation for international trade is the risk for an exporter or an importer that the cost of foreign currency applied in business volumes will differ from the hoped and calculated. An exposition to foreign currency and a currency risk can make additional profits, and not just losses. However, being in an exposition to currency means relying on a case and most of businesspersons prefer not to allow their company being sensitive to unexpected changes. Therefore, the entities find methods of minimizing or complete elimination of exposition to foreign currency to plan business transactions and to predict profit more authentically (Frieden & Lake 20).