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    Quest Company has seen dramatic fluctuations in earnings

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    Quest Company began operations five years ago. The company produces and sells software. The company's primary market is in the United States, where 60% of sales occur. Ten percent of the company's sales occur in Japan and 30% of sales occur in Europe. Foreign sales are denominated in local currencies. Major software purchases may be paid over a one-year period.

    Quest Company has obtained its long-term financing from U.S., Japanese, and German banks. Approximately one-half of the loans from U.S. banks are variable-rate loans, with the remainder of the company's loans being fixed-rate obligations.

    Quest Company has seen dramatic fluctuations in earnings during its five years of existence.

    Identify the types of risk faced by Quest Company

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    ANSWERS

    Since a total of 40% of the company's sales occur outside the United States, then it is exposed to foreign currency risk. ...

    Solution Summary

    The expert examines Quest Company's dramatic fluctuations in earnings. The types of risks faced are identified.

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