Exchange rates act as conversion basis between two or more currencies that vary in their values. The difference that exists between both currencies is what demands a substantial conversion rate. Ideally, the current conversion rate is deemed to be 9.9 -13.9. The two currencies which are deemed to be subject in the conversion are the United States Dollars and the Pesos. Ideally, the currencies are a member of the global currencies that are used in economic transactions within and outside the country. Therefore, there is a state and rate at which trade takes place between the two currencies. It is wrong for the Home Owners Association to apply the uncertain ability and unpredictability theory to interpret and determine the current and future conversion rates for which the homeowners expect to use in the future transactions and budgeting practices of the organization.
One of the steps that Mr. Randy ought to take is to have keen study on economic events that have a direct or indirect impact on the currency powers. First, the flows identified with respect to the differentials in the inflation rate should be studied with the Mexican country. A relative comparison can be carried out to ensure that an effective solution is arrived at concerning the rate at which the conversion is carried out. Ideally, at times when the inflation rate is low, the value of the domestic currency is deemed to go high. This means that the conversion rate changes affirmatively in favor of the domestic currency as compared to the dollars. Another approach that could be essential is the comprehensive study of the interest rates. A professional approach is delegated towards the interest rates, exchange rates and the inflation rates. High interests cause the conversion rate to rise. Therefore, the rate is easily determined by these factors. It is, therefore, easy for the rate of exchange to be established.
Another approach that could help in determining the interest rate is carrying out a financial study on the current account deficits. That is, and there is a rate at which the domestic country relates with the international community. Therefore, for the group to come up with an interest rate that will suit the budgetary terms, there have to be a relatively close relationship between the international rates as determined by trade terms. Ideally, the budget will not appear to provide vague solutions when it comes to the transactions that need to be audited. In addition, the currency conversion rates are essential since the budget of the association is dependent on the draft budget of any other domestic organization that transacts with international currencies.
As stipulated in the above strategies of determining the exchange rates of the currencies, there is a probability of exchange rate fluctuations. Ideally, this causes an extensive impact on the effectiveness of the budget drafted by the organization. One ought to take actions that one to ensure that there is a sustainable means of carrying out budgeting and conversion rate forecast. First, it is important that one plans ahead in preparation of any inflation fluctuation. An essentially drafted budget incorporates timely and realistic setting of the periodic changes of the interest rates. Therefore, the changes of the interest rates are not subject to change in case of the fluctuation of foreign currencies whose probability of happening is very high.
Another way that the group can assess and avoid the negative impacts of the foreign currencies is by assessing the rate at which the organization is ready to take risks. This is outlines through the creation of clear objectives that are created upon the understanding of the fluctuation probabilities. This means that it is inappropriate to negotiate or even gamble irregularly with intention of trying to work out the fluctuation rates of the currencies. The probability is the organization will be caught unaware. A substantial research on the market trade with the assistance of specialists is essential in that the property of precautionary and speculation is used to enable the management in addressing the feasibility of the organization to suffer from unexpected currency fluctuation rates. The utilization of the managing relationships with financial specialists to ensure there is continued consultation with them. These strategies are used by management team to communicate and monitor the organization’s budgetary activities effectively.
However, it is sometimes thought that there is an alternative of using the external quotes as a reference for the budgetary conversion rate. Ideally, the financial official can also take the chance and make informed predictions. Ideally, local comparisons of the transactions can assist in identifying a probable currency conversion rate. For instance, the initial investment conversion rate that was used when the home owners were acquiring the investments can be a reference. On the other side, the previous rates that have been experienced in the historical concept of the organization are also essential in determining the probability of the current trend. In most cases, recession and boom periods are identified to take place and similar times. Therefore, the officials can set aside the external quotas and utilize the existing records to predict and manage the currency conversion rates. Ideally, the strategy could also be effective. However, overreliance of the strategy could result to an undesirable result time to time.
The use of actual data gathered from the external sources to predict the exchange rates for the foreign currencies is very essential if the association intends to perform effectively. Ideally, the actual foreign exchange rates are used internationally. They are also appreciated and utilized by most of the financial institutions which are effective in the running of any business enterprise. The use of personal conversion rate is not effective since it is thought to overestimate the value of the domestic currency or the US dollar. The use of the home-baked conversion rate is simple and cheap to initiate. However, there is a possibility that the organization may face situations that it cannot overcome due to poor estimations made within the budget.
The use of the actual foreign exchange rates to draft the budget of the association is very essential. Professional analysis implies that the use of the data that rhymes with the international trade rates is effective because it gives the organization a true picture of what is expected from the entire world. A true conversion rate is effective because it does not overestimate or underestimate the value of the currencies being compared. The owners may also benefit from the use of true conversion rate in budget drafting. The investments may yield better figures in the times where the actual conversion rate is considered. Preferably, the use of the actual conversion rate is professional and contains the property of consistency that is essential in accounting and budgetary practices.