Illustrate about foreign exchange earnings, Financial Management

Assignment Help:

Q. Illustrate about foreign exchange earnings?

In theory foreign exchange earnings must not be hedged as the chances of an adverse movement are equivalent to those of a favourable one so that in the long-term exporters like Marton should break even. This is able to be inferred from the figures above - the chances of the dollar appreciating are equal to the chances of it depreciating against sterling (30%).

Indeed when allowance is prepared for the wider spread between the rates at which banks will buy and sell currency as between spot and forward transactions use of the forward market is more costly. Nevertheless failure to hedge can leave firms exposed to the risk of erratically large adverse currency movements perhaps large enough to bankrupt the smaller firm. Consequently although the risks in the long-term are roughly symmetrical many companies deem it prudent to hedge at least some part of their overseas earnings especially those relating to major contracts.


Related Discussions:- Illustrate about foreign exchange earnings

Barriers of shrm implementation, Q. Barriers of SHRM Implementation? Ba...

Q. Barriers of SHRM Implementation? Barriers of SHRM: barriers to successful SHRM implementation are complex. The main reason is a lack of growth strategy or failure to impleme

Define conservative type of working capital financing plan, What is the mos...

What is the most conservative type of working capital financing plan a company could implement?  Explain. An all equity capital structure would be mainly conservative type of wor

What is share exchange, What is Share exchange    Predator company off...

What is Share exchange    Predator company offers their shares in exchange for target company's shares. So target shareholders become part of predator shareholders and so have

., Identify and explain the key stages in the capital investment decision-m...

Identify and explain the key stages in the capital investment decision-making process and the role of investment appraisal in this process.

Show the present value of a single flow, Q. Show the Present Value of a Sin...

Q. Show the Present Value of a Single Flow ? Discounting or else Present Value of a Single Flow (Lump Sum):- We are able to determine the PV of a future cash flow using the for

Explain the principles of taxation and double taxation, Question 1 ) A Glob...

Question 1 ) A Globalization is a procedure of international integration that arises due to increasing human connectivity as well as the interchange of products, ideas and other ph

Advanced financial management, QUESTION 1 [25 marks] Xelo Ltd, whose curren...

QUESTION 1 [25 marks] Xelo Ltd, whose current sales consist of fixed operating costs of R140 000 and variable operating costs equal to 22% of sales, has made the following two sale

Explain economic exposure to exchange risk, How would you explain economic ...

How would you explain economic exposure to exchange risk? Answer: Economic exposure can be illustrated as the opportunity that the firm’s cash flows and so its market value may

State the terms- stock and share, Explain the terms- Stock and  Share ...

Explain the terms- Stock and  Share Stock Ownership of a company represented by shares that are a claim on the company's earnings and assets. Share Unit of equity

Profit maximisation decision criterion, Profit Maximisation Decision Criter...

Profit Maximisation Decision Criterion According to this approach, actions which increase profits must be undertaken and those that decrease profits are to be avoided. In speci

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd