Chapter 9, Problem 9QA

Please answer this ONE question on Foreign Exchange markets Statoil, the national company in Norway, is a large, sophisticated, and active participant in both the currency and petrochemical markets. Although it is a Norwegian company, because it operates within the global oil market, it considers the U.S. dollar ($), rather than the Norwegian krone (Nok), as its functional currency. Ari Karlsen is a currency trading strategist for Statoil. The question is devided into a) and b): a) Statoil sold 1 million barrels of crude oil to the Norwegian petrol station chain, Circle K, today for 120 Nok per barrel (Nok denotes the Norwegian Krone). Statoil expects to receive the full payments from Circle K in 3 months’ time when the crude oil is delivered to Circle K’s facilities in Norway. Statoil is informed that Circle K will pay for the oil in Norwegian Krone. Ari is asked by the Chief Financial Officer (CFO) about the strategy to reduce the uncertainty around the expected payment from Circle…

Romulus Corp. is a US-based company that prepares its fi nancial statements in accordancewith US GAAP. Romulus Corp. has two European subsidiaries: Julius and Augustus. AnthonyMarks, CFA, is an analyst trying to forecast Romulus’s 20X2 results. Marks has prepared separate forecasts for both Julius and Augustus, as well as for Romulus’s other operations (priorto consolidating the results.) He is now considering the impact of currency translation on theresults of both the subsidiaries and the parent company’s consolidated fi nancials. His researchhas provided the following insights:• Th e results for Julius will be translated into US dollars using the current rate method.• Th e results for Augustus will be translated into US dollars using the temporal method.• Both Julius and Augustus use the FIFO method to account for inventory • Julius had year-end 20X1 inventory of €340 million. Marks believes Julius will report €2,300in sales and €1,400 in cost of sales in 20X2.Marks also forecasts…

Romulus Corp. is a US-based company that prepares its fi nancial statements in accordancewith US GAAP. Romulus Corp. has two European subsidiaries: Julius and Augustus. AnthonyMarks, CFA, is an analyst trying to forecast Romulus’s 20X2 results. Marks has prepared separate forecasts for both Julius and Augustus, as well as for Romulus’s other operations (priorto consolidating the results.) He is now considering the impact of currency translation on theresults of both the subsidiaries and the parent company’s consolidated fi nancials. His researchhas provided the following insights:• Th e results for Julius will be translated into US dollars using the current rate method.• Th e results for Augustus will be translated into US dollars using the temporal method.• Both Julius and Augustus use the FIFO method to account for inventory • Julius had year-end 20X1 inventory of €340 million. Marks believes Julius will report €2,300in sales and €1,400 in cost of sales in 20X2.Marks also forecasts…