You're the CFO of the Overseas Sprocket Company, which imports a great deal of product from Europe and the Far East and is continually faced with exchange rate exposure on unfilled contracts. Harry Byrite, the head of purchasing, has a plan to avoid exchange rate losses. He suggests that the firm borrow enough money from the bank to buy a six- month supply of foreign exchange that would be kept in a safety deposit box until used.
"We'd never have another unexpected exchange rate loss again," says Harry. Prepare a polite response to Harry's idea. Explain why you do or don't like it, and suggest an alternative if you feel one is appropriate.© BrainMass Inc. brainmass.com October 25, 2018, 10:12 am ad1c9bdddf
This solution discusses (with references) the alternatives to buying currency at a spot rate and holding it until bills are due. It discusses and differentiates several derivative instruments in plain English.
Diminishing Risk and Operating in Foreign Countries
What are three things firms can do to diminish risk when operating in foreign countries? Please provide a brief explanation of each so that I can expand on it myself. I just need help getting started, not looking for someone to do the whole thing for me.View Full Posting Details