Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Discuss the following topic: "Is restructuring of operations a solution to operating exposure?" Operating exposure measures any changes in the present value of a firm resulting from changes in future operating cash flows caused by any unexpected change in exchange rates. From a broader perspective, operating exposure is not just the sensitivity of firm's future cash flows to unexpected change in foreign exchange rates, but also its sensitivity to other key macroeconomic variables, such as interest rates and inflation rates. However, these variables are often in disequilibrium with one another. Therefore, unexpected changes in interest rates and inflation rates could also have a simultaneous but differential impact on future cash flows.
Instructions:
1- To read the point and counter-point of this argument and express your own opinion on this topic :
Point: Yes
Multinational firms may restructure their operations to reduce their operating exposure. The restructuring involves shifting the sources of costs or revenue to other locations in order to match cash inflows and outflows in foreign currencies. The way a firm restructure its operations to reduce operating exposure to exchange rate risk depends on the form of exposure. If future expenses are more sensitive than future revenue to the possible values of a foreign currency, then the firm can reduce its operating exposure by increasing the sensitivity of revenue and reducing the sensitivity of expenses to exchange rate movements. Firms that have a greater level of exchange rate-sensitive revenue than expense, however, would reduce their operating exposure by decreasing the level of exchange rate-sensitive revenue or by increasing the level of exchange rate-sensitive expenses.
Counter-point: No
Some revenue or expenses may be more sensitive to exchange rates than others. Therefore, simply matching the level of exchange rate-sensitive revenue to the level of exchange rate-sensitive expenses may not completely insulate a firm from the exchange rate risk. Furthermore, restructuring operations to reduce operating exposure is a more complex task than hedging any single foreign currency transactions, which is why managing operating exposure is normally perceived to be more difficult than managing transaction exposure.
1. financial ratio analysis is used by managers equity investors long-term creditors and short-term creditors. what is
profitability ratios trading on the equity. digital relay has both preferred and common stock outstanding. the
the friendly national bank holds 50 million in reserves at its federal reserve district bank. the required reserves
assuming interest rates are 5 for aaa rated corporate bonds calculate the value of your bond relative to this interest
question 1 prepare a short essay for each of the subsequent questions. where possible illustrate with an appropriate
Calculate the NPV and IRR for the project from the standpoint of the parent company. What are your recommendations for the proposal?
Discuss the approach your organisation used to manage its new initiatives-especially new product developments and Discuss how your organisation evaluates projects within its overall portfolio.
What is the weighted average duration of bank's asset portfolio and liability portfolio? What is the leverage-adjusted duration gap?
Lawrence Industries' most recent annual dividend was $1.80 per share (D0=$1.80), and the firm's required return is 11%. Find the market value of Lawrence's shares when: Dividends are expected to grow at 8% annually for 3 years, followed by a 5% con..
Description: Write a report about your workplace analysing it in terms of diversity. Convince your manager to develop a "Diversity Management Strategy" by explaining the advantages of having such a strategy. Support your argument with evidence, resea..
A local government is about to run a lottery but does not want to be involved in the payoff if a winner picks an annuity payoff. The government contracts with a trust to pay the lump-sum payout to the trust and have the trust (probably a local ban..
Prepare report on providing a clear audit trail to your company. Prepare a portfolio of analytical reference materials including the financial reports for at least five years. This is your analytical permanent file for the chosen company.
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd