Invoicing Policy to Reduce Exposure Celtic Co. is a U.S. firm that exports its products to England. It faces competition from many firms in England. Its prices to customers in England have generally been lower than those of the U.K. competitors, primarily because the British pound has been strong. Celtic has priced its exports in pounds, and then later converts the pound receivables into dollars. All of its expenses are in the United States and are paid with dollars. The firm is concerned about its economic exposure. It considers changing its pricing policy, so that it will price its products in dollars instead of pounds. Offer your opinion on why this strategy will or will not significantly reduce Celtic’s economic exposure.

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 10, Problem 26QA
Textbook Problem

Invoicing Policy to Reduce Exposure Celtic Co. is a U.S. firm that exports its products to England. It faces competition from many firms in England. Its prices to customers in England have generally been lower than those of the U.K. competitors, primarily because the British pound has been strong. Celtic has priced its exports in pounds, and then later converts the pound receivables into dollars. All of its expenses are in the United States and are paid with dollars. The firm is concerned about its economic exposure. It considers changing its pricing policy, so that it will price its products in dollars instead of pounds. Offer your opinion on why this strategy will or will not significantly reduce Celtic’s economic exposure.

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