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Foreign Exchange and Hedging Transactions

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Discuss the concept of foreign exchange and why companies hedge certain transactions?

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Discussion Question - Foreign Exchange and Hedging

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HEDGE TRANSACTIONS
Discuss the concept of foreign exchange and why companies hedge certain transactions?

SOLUTION
The likelihood that a business may lose funds because of changes in the foreign exchange rate is called Foreign Exchange Exposure. A multinational firm's profitability, net cash flow, and market value can change because of a change in exchange rates.

Financial manager spend time measuring foreign exchange exposure and attempting to reduce it.
There are ...

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