Purchase Solution

Foreign Exchange: Blades, Inc

Not what you're looking for?

Ask Custom Question

Prepare a case study analysis of Blades, Inc. Case: Assessment of Exchange Rate Exposure, located at the end of Chapter Ten in the International Financial Management text by Jeff Madura.

1. What type(s) of exposure (i.e., transaction, economic, or translation exposure) is Blades subject to? Why?
2. Using a spreadsheet, conduct a consolidated net cash flow assessment of Blades, Inc., and estimate the range of net inflows and outflows for Blades for the coming year. Assume that Blades enters into the agreement with Jogs, Ltd.
3. If Blades does not enter into the agreement with the British firm and continues to export to Thailand and import from Thailand and Japan, do you think the increased correlations between the Japanese yen and the Thai baht will increase or reduce Blades' transaction exposure?
4. Do you think Blades should import components from Japan to reduce its net transaction exposure in the long run? Why or why not?
5. Assuming Blades enters into the agreement with Jogs, Ltd., how will its overall transaction exposure be affected?
6. Given that Thai roller blade manufacturers located in Thailand have begun targeting the U.S. roller blade market, how do you think Blades' U.S. sales were affected by the depreciation of the Thai baht? How do you think its exports to Thailand and its imports from Thailand and Japan were affected by the depreciation?

Purchase this Solution
Solution Summary

1060 words report and excel file attached.

Solution Preview

The response addresses the queries posted in 1277 words with references.

//Before answering the questions according to the direction, initially, it is essential to understand the case carefully. It is also significant for us to understand the factors that can affect foreign exchange rate. So, at first, I will discuss the case under the heading of Summary.

Summary

Blades Inc manufactures Roller Blades for exports to Thailand, it also imports raw material from the same country. The company is planning to import raw material from Japan again to reduce transaction exposure as currently, there is a strong correlation in Thai Baht and Yen. Company is expanding in other countries because of high profit margins and looking for establishing subsidiaries or acquiring business in other regions .Other reason for expansion is the increasing competition from Thailand. Company is planning to have a contract with the British company.

Factors Affecting Foreign Exchange Rates

It is normally the inflation rate differential between the two countries that influences the exchange rate between the two currencies. Interest rate changes also influence the exchange rate. A rise in interest rate increases the supply of loanable funds which means greater supply of money and a depreciation in domestic currency.

//Above I discussed the case in an effective manner; so that you can understand it successfully. Now as per the direction, I have to answer the questions related to the various risks or exposures in the international financial market. In the beginning, I will script the different types of exposures in the company, for example:

Solution1.

Transaction exposure involves the possible exchange loss or gain on existing foreign currency- denominated transactions. Blades are subject to transaction exposure as it has foreign currency transactions due to selling products and importing raw material from other currency. Suppose Blades enters into an agreement with Japan to buy raw material for its products. The price of raw material is fixed in Yen. Blades ...

Solution provided by:
Ashish Sharma, MBA (IP)
Education
  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
Recent Feedback
  • "Thank You so much! "
  • "Always provide great help, I highly recommend Mr. Sharma over others, thanks again. "
  • "great job. I will need another help from you. "
  • "first class!"
  • "Thank you for your great notes. Will you be willing to help me with one more assignment? "
Purchase this Solution
Free BrainMass Quizzes
SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

View More Free Quizzes
Related BrainMass Solutions

  • Explain factors that affect foreign exchange rates

    The solution explains factors that affect foreign exchange rates for Blades, Inc.

  • Dealing with Foreign Exchange Rates: Blades Inc. Case

    328472 Dealing with Foreign Exchange Rates: Blades Inc. Case Blades, Inc., needs to order supplies two months ahead of the delivery date.

  • Forecasting Exchange Rate

    249374 Forecasting Exchange Rate Blade Inc, is U.S Based manufacturer of roller blade, has 3 years contract to export to Thailand.

  • How US operations will be affected

    CASE STUDY Here is the story... we are to use the Indian Rupee in place of the Thai baht As a financial analyst for Blades, Inc., you are reasonably satisfied with Blades' current setup of exporting "Speedos" (roller blades) to Thailand.

  • Case Study - Blades Inc

    The solution has the case studu of Blades Inc relating to the yen outstanding and the hedging techniques

  • Hedging

    194580 Blades, Inc: call options, futures contract, currency conversions, hedging, spot price Blades Inc. needs to order supplies two months ahead of the delivery date.

  • Phase 3: Discussion Board

    . // Managing foreign exchange risk: For managing the foreign exchange risk in Fresh Juice Inc., the company must consider that the transaction risk is more important than the translation and the operating risk.

  • Using Foreign Exchange and Derivative Markets to Minimize Risk

    327113 Using Foreign Exchange and Derivative Markets to Minimize Risk You are the Finance Manager of CompuTech, Inc, a US based company.

  • Journal entries for Texana Inc. And year-end adjustments.

    224401 Texana Inc. imports inventory from Mexico. Please explain the attached problem. Any examples would be greatly appreciated. Thank you. Texana Inc. imports inventory from Mexico.

View More Related Solutions