What is the purpose of a hedge of foreign exchange risk?

What will be an ideal response?


Hedge of foreign exchange risk is a strategy to limit exposure to the effect of unfavorable changes in the value of foreign currencies that are caused by fluctuations in exchange rates. In addition to avoiding possible losses, companies hedge foreign currency transactions and commitments to introduce an element of certainty into the future cash flows resulting from foreign currency activities by establishing a price today at which foreign currency can be sold or purchased at a future date.

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Callable bonds can be redeemed by the issuing corporation at the fair market price of the bonds

a. True b. False Indicate whether the statement is true or false

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In 2014, Climber Corporation issued for $110 per share, 18,000 shares of $100 par value convertible preferred stock. One share of preferred stock may be converted into three shares of Climber's $30 par value common stock at the option of the preferred shareholder. On December 31 . 2015, all of the preferred stock was converted into common stock. The market value of the common stock at the

conversion date was $40 per share. What amount should be credited to the common stock account on December 31 . 2015? a. $1,620,000 b. $1,800,000 c. $1,318,000 d. $1,960,000

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A cause is the reason for or the origin (root) of a change, such as customers being unable to afford travel vacations.

Answer the following statement true (T) or false (F)

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Settles Corporation has provided the following financial data:Balance SheetDecember 31, Year 2 and Year 1AssetsYear 2Year 1Current assets:      Cash$142,000 $110,000 Accounts receivable, net 104,000  120,000 Inventory 119,000  120,000 Prepaid expenses 37,000  40,000 Total current assets 402,000  390,000 Plant and equipment, net 717,000  720,000 Total assets$1,119,000 $1,110,000        Liabilities and Stockholders' Equity      Current liabilities:      Accounts payable$156,000 $180,000 Accrued liabilities 84,000  70,000 Notes payable, short term 66,000  60,000 Total current liabilities 306,000  310,000 Bonds payable 250,000  250,000 Total liabilities 556,000  560,000 Stockholders' equity:      Common stock, $4 par

value 240,000  240,000 Additional paid-in capital 90,000  90,000 Retained earnings 233,000  220,000 Total stockholders' equity 563,000  550,000 Total liabilities & stockholders' equity$1,119,000 $1,110,000 Income StatementFor the Year Ended December 31, Year 2Sales (all on account)$1,360,000 Cost of goods sold 850,000 Gross margin 510,000 Operating expenses 462,692 Net operating income 47,308 Interest expense 19,000 Net income before taxes 28,308 Income taxes (35%) 9,908 Net income$18,400 Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at the end of Year 2 was $5.89 per share.The company's return on equity for Year 2 is closest to: A. 3.31% B. 5.09% C. 8.50% D. 50.52%

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