Essays on Foreign Currency

Volatile Prices of Primary Goods Preventing Economic Development in LDCs

Background The primary goods refer to the products that are obtained directly from agricultural activities and are not subjected to the process of manufacturing. The most important primary products in an economy include those that are obtained from the sector, such as the fishing, agricultural, forestry, and mining industries. In terms of the least developed nations, which are mainly located in Africa, Asia, and the Latin America, the trade characteristics of their economies include the dependence on the developed, industrialized nations, and, significantly, the reliance on primary products. Accordingly, in international trade, the least developed nations’ exports are primary ...

Macroeconomic and Account Balances

India is seen to react rapidly to volatility in the global economic environment as concurred in the modifications of the macroeconomic policies when the North Atlantic financial crisis occurred (Kapur and Mohan, 2014, p.1). However, India’s policy changes is perceived by Kapur and Mohan (2014, p.1) to be temporarily stimulating to the local economy since the expected growth will gradually slowdown. But the additional effect is that inflationary and BoP pressures remain constant, which can either by improved or worsened by the domestic policy bottlenecks (Kapur and Mohan, 2014, p.1). This was seen during the financial market volatility ...

Introduction

On June 23, 2016, UK held a referendum in which 52% of the voters chose to leave the European Union (EU) against 48% who chose to stay (Taub, 2016). The Brexit presents a massive change. Without a doubt, the Brexit will strongly influence how project managers will run their projects. Hillary and Allen (2016) observe that all sectors and organization will have to review the risks and opportunities that will emanate from Brexit. Unfortunately, project managers, like everyone else, have limited information that would help them to assess the risks and opportunities associated with the Brexit. Notwithstanding the lack ...

Understanding Financial Statements (John Deere)

What 3 items of important information does the income statement reveal about the financial performance of the company over the last three years? As we could see from financial statement of John Deere Company, the sales are decreasing for past three years (2013-2015 – the latest available data). There was almost $35 billion of Sales in 2013 and only nearly $25.7 billion in 2015. This is the major fact of financial performance. As a result, Net Income failed to $1.9 billion in 2015 from $3,53 billion in 2013 (second fact). And the last fact is that Total Costs are ...

IT Technology Implementation

IT Technology Implementation Verizon is a leading provider of telecommunication services including wireless services and equipment and wire line services tapping the mass market, global enterprise, and global wholesales (Verizon, 2016). The company’s wireless services include retail connections and retail postpaid connections. Such include Verizon LTE, 4G LTE, fiber broadband services, FiOS, internet, and cable, and video telematics. Verizon also offers technology such as cloud and security products and interactive products such as video, music, and commerce (Verizon, 2016). The company exhibited a growing revenue and net income in the last five years in all of its business ...

Abstract

When an organization has cash inflows and outflows of foreign nature, the cash forecast for every currency will help during the identification of the currency exposures. The format of the estimation should allow the users to determine the balance for every currency and whether there is a growing shortage or extra money over time based on reasonable cash flows. The increasing gaps between the cash inflows and outflows may need hedging, and the cash flows that offset over time represents the issue of timing effectively. The management of foreign exchange transaction can be achieved through the offsetting transactions to ...

PART A

Question one Apple Computer was incorporated in 1977 to design, manufactures as well as marketing mobile communication and media devices (Reuters.com, 2016). Moreover, it also sells different related software, and third party digital applications. Its products are iPhone, Apple television, iPod, Mac, both consumer and professional software applications, iOS and OSX operating systems. The Apple computers Inc. provides a variety of mobile communications, personal computing products, and portable digital players.

Question two

The operating performance of Apple Inc. relies on the general economic conditions. Therefore, for the last four years (1999 to 2002), the demand for the Apple's products has been ...

CONCLUSION

5. Conclusion The research was conducted complying with a predefined set of tools, techniques, and methods. It was accomplished without exceeding the limit of time and other resource allocated for this purpose. This chapter sets out to throw light as to what degree the study has succeeded in meeting research objectives and how it can be applied to managerial level. It is followed by detailed identifications of future prospects of research based on the current study. Finally, the researcher draws attention to some of the drawbacks of the research project along with an assessment of their impact on overall ...

Money and prices in the long run and open economies dictate the financial market. As such, that is why factors such as domestic variables and foreign monetary policies are over-emphasized. Demand for money is thus affected by the domestic variables, which include interest rates, price expectations, and permanent income, among others. As such, this paper explores the financial market to reveal the viable strategies the US can adapt to secure reliable money and prices in an open economy on a long-term basis.

The state of US Financial Market

Over the years, the economy of the US has been in good shape, especially when compared to ...

Long-term influence of monetary policy

Monetary policy can either be contractionary or expansionary, and both policies impact nominal variables differently in the long-run. Price levels A contractionary policy results in a decrease in equity prices because the income stream is discounted at a relatively higher rate. Also, the price levels of equity can drop since high-interest rates and low supply of money lead to reduced demand for equity. In this case, bonds can be an attractive investment since they pay high interests (Meltzer, 1995). Nevertheless, an increase in interest rates does not always result in fall of share prices. People may interpret the high-interest ...

Impact of dollarization in Ecuador, El Salvador, Panama, and Argentina

Introduction In the middle of the 90’s, different countries faced the financial crises. Some of these crises were severe and of vital importance. These crises majorly include “Tequila crisis”, East Asian crisis, the Brazilian crisis and the Mexican crisis and these hit the whole world leaving a devastating impact on the emerging markets of the world. These crises not only had an adverse effects on the related countries by which these are associated, but they also had affected the growing economy of the other countries. The emerging economies have suffered a serious setback as a result of the ...

The rate at which foreign investments by multinational corporations are carried out has often culminated to the challenge of currency risk which can otherwise be defined as that existing probability of loss resulting from the alterations in the exchange rates between 2 currencies. The following article will, therefore, present a discussion on the necessary steps that can be undertaken by the multi-national enterprises in mitigating the currency risks.

Just as the financial markets of operation have the propensity of making the exchange rates to rise, they also provide a solution for them. Here, investing in the exchange traded funds ...

International FinanceName of the StudentCourseProfessorUniversityDate

International Finance INTRODUCTION

British Airways is one of the leading airlines in the United Kingdom primarily dealing with vacations and flights internationally. They have several subsidiaries and have increased their fleet to 262 planes. British Airways now has flights to 169 destinations.

Company B: Volkswagen

Volkswagen, Europe’s leading carmaker and one of the most successful global companies, reported a 95 drop in 2003 fourth quarter profits which collapsed from €1.05 billion to a plain €50 million. For all of 2003, Volkswagen’s operating profit fell by 50 percent from the record levels attained in 2002. Although the profit crash had more ...

Abstract

The current paper explores the main differences of the Great Recession in 2007-2009 from other economic collapses in the history if the United States. Section I discusses the general features of a recession and describes the main responsibilities of the National Bureau of Economic Research. Section II is devoted to the comparison of the Great Recession with the recession of 1980s. The section is divided into four subsections. Subsection A presents the basic comparison of recessions in the U.S. history and explains the choice of the 1980s period for the further comparison. Subsection B explores differences in unemployment in ...

Introduction

The exchange rate has become an integral component of modern economics. Its role stems from its far-reaching effects on the economy of a country, investments, the profitability of firms, and personal finances. Countries have become even more interdependent due to the rapid advancement in communication technologies and the expansion of global trade, which have significantly reduced the geographical distance between both individuals and countries. However, since nations use a broad range of domestic currencies with different values, trading partners must, therefore, rely on currency conversion methods to facilitate global transactions. This paper explores the importance of exchange rate and ...

A Statement of the Challenges faced by Peterbilt Motors Company

The Denton, Texas headquartered motors manufacturing company, Peterbilt is faced with lots of challenges in the process of their operations, especially in their international supply chain management. At the very top of the challenges that the company faces while undertaking its international trade is the problem of language barrier and cultural differences among the different countries in which it operates across the globe. Secondly, the corporation faces a problem of the time difference between the countries they operate in and their central operations base in Texas. This time difference has created great levels of inconveniences in terms of realization ...

(A case for a parent firm in a net oil exporting country with subsidiaries in a net importing country that has free market economy, politically stable, positive currency speculation and possibility of government defaulting on its debt)

Oil Prices and Exchange Rate

Oil price dynamics have a bearing on the ability of multinational to precisely model the future exchange rates. In most instances, in order to manage the foreign exchange rate risk that the firm is exposed in the international business arena, most multinational will hedge against the risks that are associated with exchange rate fluctuations. As a result, these multinationals minimize the possible ...

Abstract

There has been a huge debate and research on different forms of the organizational change and various methods of managing those changes in the organization. Various studies and scholars have put forward their ideas and views about the change management with complementary as well as opposing models of managing change in the organization. It is very crucial for an organization to change continuously and it is equally important to manage the change happening in an organization with a proper model. This paper identifies and analyzes various reasons for the organization to change and manage the change. The paper further ...

BUSINESS FINANCING

Introduction Business owners and managers seeking financing encounters an essential decision regarding choice of whether to borrow money or to make use new equity capital. Given that equity and debts have very varied characteristics, each of them has different effect on cash-flow, earnings, and taxes as well as on balance sheet. They also have different impacts on any company`s dilution, leverage as well as a host for other financial metrics by which companies are measured. Lastly, each business financing options presents a different kind of relationship in relation to the financing source. Thus, a company`s plan on ...

Reasons for the severe decline in Chinese Stock market in 2015

Between June 2014 and June 2015, the CSI 300 Index rose by 150%, reaching the peak at 5,166.3 on 12th June 2015. What follows was a severe decline in the stock index. Within just one month, the CSI 300 index had lost 30% to 3,507 on July 8. Several factors caused the fall.

Short selling

In the run-up to the stock market decline, investors were aggressively involved in short selling and margin trading. Short-selling and margin trading allowed investors to purchase shares using borrowed money thereby increasing the demand for stocks. Investors engaged in short-selling sell stocks borrowed from ...

International Finance

1 a. Discuss the corporate control of your business. Explain why your business in Mexico is exposed to agency problems. b. How would you attempt to monitor the ongoing operations of the business? c. Explain how you might be able to use a compensation plan that limits the potential agency problems? d. Assume that you have been approached by a competitor in Mexico to engage in a joint venture. The competitor would offer the classroom facilities (so that you would not need to rent classroom facilities), while your employees would provide the teaching. You would split the profits with ...

Situation

Speculative Strategy: Currency options Option premium = 1,000,000 × 0.0005 = $500 As shown by the diagram, currency options will help ABC Corporation to mitigate the currency risk. It is speculative since it not only protects the firm from unfavourable movements in the exchange rate but also gives it an opportunity to gain profits. It protects the company from downward movements in the exchange rate since the minimum it can receive is $9,200 irrespective of how low the rate falls. However, the gains from forward exchange rate movements are not limited. If the exchange rate is more than the ...

Insecurity and Currency Devaluation in Africa: A Case Study of Nigeria

Insecurity and Currency Devaluation in Africa: A Case Study of Nigeria

Introduction

Geography and history have truly taken its toll on Africa. Africa, the cradle of civilization, continues to be an enigma to the rest of the world. The continent commonly referred to as the Dark Continent has suffered from gross prejudice, stereotype, discrimination, and neglect from the rest of the world. Most Europeans and Americans see Africans as inferior, living in the jungle (forest), uncivilized, primitive, violent cannibals and so forth. But obviously, recent occurrences in Africa have proved them true even though not in toto. The genocide and ...

Coca Cola most recent financial statements for the year the fiscal year ended 31st December 2015, addresses foreign currency exchange risk in Item 7A. Quantitative and Qualitative Disclosers about Market Risk (Coca Cola, 72). The company faces significant foreign exchange risk because it operates in 72 currencies and earns $23.934 billion from operations outside the United States (Coca Cola, 72). Coca Cola operates in over 200 countries and faces three types of foreign exchange risk, transaction risk, translation risk, and economic risk. The company manages its foreign exchange rate risk on a consolidated basis. The transaction risk is the ...

Forward Hedge

Spot rate US$ 0.74 Forward rate US$ 0.76 US $ received = 800,000*0.76 = US$ 608,000. If Novena Ltd. takes the forward contract they will exchange the Singapore dollars at the agreed forward rate of US$ 0.76 per Singapore dollar. Under the forward hedge Novena Ltd. will receive US$ 608,000.

Money market Hedge

Step I Borrow in foreign currency 800,000/ (1.07) = SGD$ 747,663.55 In the first step Novena Ltd. Should borrow in Singapore dollars. The amount of money borrowed should be the present value of the expected receipt discounted at Singapore borrowing rate. The present value of SGD$ 800, ...

Currency exchange rate is a country’s currency expressed in foreign currency’s terms. This is affected by the forces of demand and supply in the currency market. Currency exchange rates are essential whenever making investment decisions. Investors tend to invest in countries where the exchange rate is high as in so doing their returns will be maximized. The investors also use the exchange rate for speculative purposes when carrying out foreign exchange market transactions. For instance in instances where the exchange rate has been increasing the investor will be able to speculate a future increase in the rate. Various factors ...

The Financial Accounting Standards Board is an organization that establishes the standards of financial accounting which are used in the preparation of financial reports by entities that are not governmental (FASB, 2011). The standards are important as they enable the efficient working of the economy as the distribution of resources relies on credible financial information.

The mission of FASB is to establish and improve the standards of accounting, financial and reporting which results in provision of useful information to the investors and users of financial statements. The mission is usually attained through a process that is independent and comprehensive, the ...

The depression of 1930’s was known as the great depression because its ripples were felt in all countries of the word. It originated from United States and its spread was attributed to the forged relationship between United States and European economies. The further spread to primary producing countries is attributed to the trade interrelation which had developed between these countries and the already developed countries. The primary producing nations included Latin America, Asia and Africa states. This depression strongly pressed countries like Britain and Germany because they had a lot of loans obtained from United States. Employment in these ...