Essays on Foreign Exchange

Company Profile

Revered as the biggest e-commerce website around the globe, Amazon Inc. is an American multinational entity engaged in e-commerce selling and cloud computing. Founded in the year 1994 by Jeff Bezos, the company is headquartered in Seattle, Washington DC. Amazon is the biggest e-retailer in terms of revenue and market capitalization. Beginning with the modest background of selling books and Blu-Ray DVD’s, Amazon today offers more than billion products and is now operating globally with presence in 19 countries. The company is listed on NASDAQ under the ticker symbol of AMZN and is also the constituent of NASDAQ ...

Procter & Gamble is a Multinational consumer goods company which was incorporated in 1905 in Ohio, United States. It manufactures several consumer products and offers around 65 different brands under several product categories such as “Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care” (The Procter & Gamble Company, 2016). The company sells its products in almost 200 countries and conducts on-the-ground operations in almost 100 countries.

Balance sheet

P&G follows generally accepted accounting principles applicable in the Unites States for presentation and preparation of its financial statements. Much like other publically traded companies, P&G also electronically files its annual, ...

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

Arabella Nuts and Confectionery is one of the UK’s finest confectionery, nuts and dried fruits company. The company produces a variety of Mediterranean, Middle East, and other international tastes. Arabella has been in existence for more than 20 years in which it has been serving exclusive and top-end stores and hotels in the UK (Arabella Nuts and Confectionery, 2017). The company operates majorly through its online channel. However, it also has physical shops within the Westfield Shopping Centers at both London Shepherd’s Bush and Stratford City. In light of this brief background of Arabella Nuts and Confectionery, ...

Managing a business or any other organization in the modern world involves several challenges. It is important to understand the forces behind globalization and the implications of globalization in management. Globalization is driven by the advancement in technology, removal of barriers to cross-border trade, among other forces. A multinational firm must understand these dynamics to enable to adapt promptly to global changes. The international financial system consists of the foreign exchange market, the international bond market as well the derivative market. The forex market involves the exchange of foreign currencies while the derivative market involves derivative financial instruments such ...

Hawai'i was the 50th state to join the USA. It comprises 132 islands and is said to be the home of volcanic islands. These islands reside in the Central Pacific Ocean. Moana Loa is one of the top most active volcanoes that had formed the island of Hawaii in the ocean (Networks, 2016). The movement of plate tectonics has resulted in the volcanic eruption and, however, the volcano towering and presence of valleys had a significant impact on the economic value.

Theory of plate tectonics

Plate tectonics theory explains that upper layer of the earth’s surface is segregated into various plates that ...

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 ...

ANALYSIS AND FINDINGS

3. Analysis and Findings 3.1. Introduction 3.2. Analytical Tool – Regression Multiple regressions are performed to assess the relationship of single independent variable i.e. crude oil prices (on Brent benchmarking) with all four dependent variables including Indian GDP growth, Indian Balance of Payments, Exchange rate between INR and USD, and the inflation rate in India. 3.3. Measures for Independent Variable – Crude Oil Price Crude oil is the most commonly traded commodity in the international market. Crude oil price stands independent variable in the underlying study, and same is considered for this purpose of analysis. The Periodic time frame for change ...

About the paper

The paper is commissioned to conduct an analysis of the recent 10K statement of Procter and Gamble(P&G) and Disney with the objective of framing a prudent rationale for investing in the stock of these companies. However, with the purview of attaining comprehensive vision related to the analysis, we will also refer to analyst reports of these two stocks and will align the outcome with the economic and federal reserve data as whether it is an appropriate time to take a position in equities.

Company Analysis: P&G

During 2015, the company faced tough business environment and witnessed a 5% decline in the ...

Describe portfolio investments and FDI. How do they differ and why is it important to distinguish between them?

Foreign portfolio investments (FPI) and foreign direct investments (FDI) are two commonly used and at times easily confused phrases. Foreign portfolio investments refer to investments in financial assets in a foreign country. These financial instruments include instruments like stocks and bonds. Investors love to invest in such instruments in order to diversify and hedge their portfolios. For example, Brexit has caused European banks to shed their values significantly and some international fund managers have already started purchasing these banks to diversify their portfolio and take advantage of attractive stock valuations. On the other hand, foreign direct investment refers to ...

Finance

About the paper The objective of writing this paper is to perform an in-depth yet succinct analysis of the financial statements and Management Discussion &Analysis (MD&A) section of Procter and Gamble (P&G). The attempt made will constitute a one-run discussion of all the financial statements and MD&A section within the accounting framework and a format of an accounting paper. The conclusion will thus assist our readers as how the company has performed during the recent years and how the management access their financial performance. However, before we initiate the core discussion, we will provide a brief discussion relating to ...

IFRS and US GAAP: Similarities and Differences (Financial Assets)

IFRS and US GAAP: Similarities and Differences (Financial Assets)

Introduction

The US GAAP (Generally Accepted Accounting Principles) is a set of accounting standards followed in the United States. With the emergence of internationalization, cross border flow of capital, people, cultures, and ideas became very common and the situation in turn contributed to the rapid growth of multinational corporations. Since different countries followed different accounting standards earlier, it was very difficult for MNCs to record their financial/accounting transactions in a unified manner. It persuaded regulators and businesses worldwide to think of a globally recognizable accounting standard leading to the development of ...

Q1. If an asset is owned in Germany by a US company and the dollar loses value (Euro gains value) then the asset’s value would depreciate on the company’s balance sheet. Q 2. Foreign exchange risk is present because foreign exchange rates keep on fluctuating. Q 3. A currency correlation shows the relationship between the values for two currencies.

Q 4. Explain in 2 or 3 paragraphs what hedging is and explain a type of hedge? How does the hedge work?

Hedging is a foreign exchange strategy used by international traders where they aim at limiting losses and remain capable of making profits. It is therefore a way of protecting forex investments against possible losses. This is an essential ...

Domestic companies seek foreign expansion to expand their markets and even grow further to achieve their ambitions of becoming international companies. However, these domestic companies face various challenges such as foreign competition, political risk, and foreign exchange risks. There are many opportunities and benefits available when a domestic company chooses to expand its market internationally, but the company also need to take on some additional risks (Salamzadeh & Kawamorita Kesim, 2015). The company may face foreign competition from other similar companies; therefore, it is important for the enterprise to strategically evaluate the market demand in order to be able to ...

Introduction

Business growth requires the adoption of various corporate levels strategies such as diversification into new markets. With that, it is necessary to identify the most suitable market regarding market demand and policies. That is because the country’s productivity determines the living standards, hence, the demand while policies determine ease of doing business and the productivity level. In that view, this report presents a recommendation and analysis of the most suitable country for Apple to expand to for its iPhone brand. To achieve the objective, the report presents a summary of the country of choice followed by an overview ...

Community bank is an independent, small and locally-owned commercial bank, which operates and obtains its funds solely from the community, where it is based. Community banks focus on providing traditional banking, derive deposits locally and mostly make loans to local businesses. It is widely known that today community banks provide most of the loans to our nation's small businesses and are an important financial resource to small cities. Because of that and because of the fact that they have knowledge of their local community and their customers, they are called “relationship” banks. They base their credit and loan decisions ...

“The finance industry is multifaceted, offering a variety of positions catering to a number of different skills and interests” (Kochanek). Finance is a lucrative career option and includes several opportunities in the field of commercial banking, corporate finance, investment banking, mutual and hedge funds, financial planning, management consultancy, insurance, equity management, money management, real estate, valuation analysis and the like. The scope of the subject also includes the study of financial data and the analysis of financial determinants that affect the economic health of securities, companies, capital markets and countries alike. Job opportunities in the Commercial banking sector are ...

China

1. COUNTRY

We have chosen China as a country for analysis

2. RECOMMENDATION We have decided to convert US dollar to Chinese yuan on May 24, 2016. The total cost in dollars according to this option is calculated further in question 9. 3. CHINESE ECONOMY OVERVIEW China’s role in the international arena has been growing in the recent years. Apart from being the most populous country with over 1.3 billion people and one of the largest countries in the world by territory, it has been experiencing substantial economic development in the past decades (Naughton 3). China is the second largest economy in the world after the USA. ...

The Step of the Risk Management Process

The risk management process is comprised of five core steps. The first is the identification of risks. At the heart of this phase is to identify what is likely to hinder the ability to meet the targeted goals. After the risk has been identified, the next step is to analyze it. This stage requires one to determine the probability and the consequences of the identified risk(s). It assists a person or a group to understand the inherent nature of the risk along with the potential effects on the set goals. The third step is the risk ranking or ...

Managing risk is a vast endeavor, not easily understood. Hampton (2011, p. 2) describes that “one large corporation identifies 2,100 business unit risks and 800 common risks across all business units” in his assessment of financial risks. For the current project, we will focus on financial risks and organization risks. Diebold, Doherty, & Herring (2010, p. 1) indicate that for being successful, risk managers must be “constant grappling with the known, the unknown and the unknowable.” The authors think of the ‘unknowable’ as a conceptual framework to improve decision-making: managers have to recognize and contrast situations that are ‘known’ ...

Introduction

On the 11th of May, Nigeria topped the BBC news headlines with the headline that Nigeria had decided to raise the petrol prices in order to ease the shortages in the country. For an economist, this kind of a news headline is bound to trigger your thoughts as to why this particular nation had decided to increase the prices having in mind the fact that the country is Africa’s largest producer of oil and also it has a fair share of the international oil market. The country’s legislative arm stated that it had found it wise to ...

Doing business internationally presents new opportunities for growth and profitability. It may seem very attractive; however, it is also associated with several risks and challenges. There are key issues that must be addressed to be successful in doing business globally. One issue that confronts a company that wishes to do business in the global market place is the country differences. Some of the differences include legal issues, language barriers, political issues and cultural differences. Before entering a new market, it is important to know the trade laws and regulations in place, the taxes and import duties imposed, intellectual property ...

Abstract

This study examined the effects of a fixed currency exchange system on China’s economy as well as global growth. The study analyzed the different economic indicators of China and their relation to the fixed currency system. We predicted that this system had an effect on various sectors of the economy and resulted in economic growth which is consistent with recent research on the benefits of a fixed system to the economy. The system has made goods from China cheap hence increased its exports and strengthened its manufacturing industry which has had a positive effect on global economic growth. ...

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 ...

International finance

Question 1: Uses of the balance of payment data It is used in the recording of economic transactions of the residents of a particular country to the rest of the world within a given period. Current account shows the total net amount a particular country is earning if it’s in excess or spending when in shortage. It’s calculated by net income from exports fewer payments from the imports. While the capital account; deals with the recording of the ownership of the foreign assets. It involves the reserve account and loans and investments a country and the rest ...

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 ...

Burma is heavily endowed with resources both renewable and non-renewable. Particularly, the country has the forest resource that has been over the years a major player in the economic growth of the country. Burma has different types of forests such as tropical rain forests and deciduous among many others. The forest resource is a source of employment for thousands, a source of livelihood and a major foreign exchange earner. For the rural dwellers in Burma, the forest resource is a source of food, fuel, shelter and also livelihood as they engage in the trade of forest products. The demand ...

Question 1

Sources of the problem facing Wight Despite Wright comprehend and being clear on his mandate as the Clearwater Seafood’s Chief Financial Officer (CFO) he had faced several challenges. As CFO, he was required to determine the best way to incorporate company’s foreign exchange risk management program into the overall growth strategy of the firm. The company has been benefiting from a weak Canadian dollar. However, strengthening of the Canadian dollar has become a source of the problem that Wight is facing. According to the article, as the Canadian dollar falls, the company’s foreign exchange risk management ...

(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 ...

Part one

U.S president purchases a Mercedes Benz C230 Mercedes is made in Germany therefore it will have to be imported to the United States. This is a debit in the balance of payment account. Importing the Mercedes is a transfer of good meaning the current account will be the one to be affected.

U.S resident purchases Chevrolet Impala

Chevrolet is a U.S based firm. Therefore, this is a no entry to the country’s balance of payment statement.

Foreigner purchases GE dryer

GE is a company based in U.S. The country has to export GE dryer to the foreigner leading to a credit entry in the balance of payment. ...

The increase in the number of corporation necessitated the formation of cooperate governance, which is a particular set of laws and practical approach through which organization is directed as well as controlled to focus on the internal and external corporate structures, with the intention of monitoring the management's actions, including those of the directors. Thereby instituting measures that may stem misdeed of corporate officers. The paper tests whether Citic Pacific as a company applied corporate governance in its oversea deals. The empirical evidence based on exhibits will be the supporting documents of the literary content written. First, the paper ...

The role and regulation of Mauritius financial institutions

Mauritius is the largest island in the world. It is one of Africa’s economy that is stable, competitive and success. The state of the economy has enabled the country to be both vibrant and thriving in sectors such as the export sector, offshore financial sector, and manufacturing. The success has allowed the country to attain a Gross Domestic Product of $11.9b. Also, its convenient position has enabled it to be an established international financial center with easy access to Asia, Europe Middle East and South Africa enabling active investment. The report aims to understand the roles and regulation ...

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 ...

Introduction

Graham and Harvey surveyed about 4,440 firms chief finance officers, and only 392 reviews came back. Large enterprises rely primarily on present value methods, capital structure and capital asset pricing models whereas small businesses likely use the payback period technique (Graham 12). Companies are more concerned about sustaining financial flexibility, healthy credit rating, stock appreciation, and EPS (earnings per share) dilution, especially when the entities are issuing equity. Little evidence was also found that organizational executives have a great concern about asymmetric information, personal taxes, free cash flows, and asset substitution. There is also some support for trade ...

In America, central banking was introduced in 1913 with the establishment of the Federal Reserve System, based in Washington DC (Federal Reserve 10). Congress passed an Act that addressed the need for a central bank that ensures a stable, safe and flexible financial mechanism. The Federal Reserve provides oversight and regulatory functions over banks to protect clients, manages risk, implement monetary laws that boost the economy and offers services to government institutions (Federal Reserve 10). Based in London, the Bank of England is the central bank of the United Kingdom and it manages the central accounts of the government ( ...

Introduction

As the modern day business sees the emergence of new capital markets with enhanced relaxation over foreign capital governance and raised flexibility of stock exchange rates, it is very important for academicians and industry experts to derive a relation between the foreign exchange rates and stock market fluctuations. This information is a key component for the international investors so that they can effectively diversify their investments with an adequate hedging strategy. Also, understanding the true nature of interrelation between the stock market and foreign exchange is also a must for the financial policymakers so that they can try to ...

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 ...

Cuba has undergone a lot of social and economic transformation over time. Following the various transition periods through which Cuba has undergone is important in understanding its culture. The cultural landscape in Cuba is predicted by themes of race and gender and how the two interact. For instance, Bengelsdorf (234) finds that despite the Cultural Revolution that has occurred in over the last century, the family norms in the country are still predicted by racial and class traditions. This means that interaction in the society was polarized by class and racial differences as well as the formation of nuclear ...

Modeling Exchange Rates

Oil price dynamics will have a bearing on the ability of multinational to precisely model the future exchange rates of the foreign exchange in the countries that they operate. In most instances, in order to manage the risk that the firm is exposed in the international business arena, especially on the foreign exchange rate, most multinational will hedge against the risks that are associated with fluctuations in the exchange rate thus minimizing the possible negative effect that a firm may experience (Jain, 2007). Therefore, in order to take a position in hedging facilities such as currency futures, the firm ...

Over the years the PRC existence, the country's banking system passed a difficult and contradictory path of development, reflecting the peculiarities of the economic policy pursued by the state at a particular stage. In the late 70-ies of the last century in China economic and social reform was launched in order to create a model of “socialism with Chinese specifics” which would combine the primacy of market principles and effective macro control of the administering state agencies. In the process of creation of this model, an important role is given to China's banking system, as it is an institution, ...

Issues Between Store Norske Spitsberger Kulkompani Corporation

1. Store Norske is considering using Coal India Limited to assist them in their international business operations. What issues will Store Norske have to address with respect to any business transactions between Store Norske and Coal Inida Limited. Discuss. Store Norske’s manner of partnering with Coal India to assist them in their international business operations is called international joint venture. This is the most common way to go into international business to a) reduce the risk in venturing into a new operation, and b) takes the favorable opportunity of using the skills and assets of the new business ...

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 ...

Recently, China has recorded a remarkable growth in its economy of nearly 10% per year. The bulk of this growth comes from the banking sector characterized by poor asset quality, low capitalization, and massive state intervention. For this reason, the government introduced sweeping changes to the financial sector to boost its stability. These changes included transforming the banking sector from a policy-driven, state-owned, non-performing system to a profit-driven, multi-ownership, competitive system. Although the sector has recorded marked improvements in its operation and efficiency, additional efforts is needed to deal with problems revolving around non-performing loans and shadow banking. The ...

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 ...

INVESTMENTS

Economic overview The economy of Jamaica greatly relies on services that accounts for over 70 percent of its GDP. The Nation continues to earn most of the foreign exchange from remittances, tourism and alumina/bauxite. Both tourism and remittances accounts for 30 percent each, whereas alumina/bauxite exports contribute roughly 5 percent of the GDP. The alumina/bauxite sector was the greatly affected by global downturn whereas the remittance flow and tourism industry remained resilient. The economy encounters several challenges to its growth including soaring corruption and crimes, huge-scale underemployment and unemployment as well as a debt-to-the-GDP ratio that is about 130 ...

Risk is defined as uncertainty in broad terms. This uncertainty can be due to a large number of factors, which depend on the type of risk. Some of the common factors which result in this uncertainty can be changes in input parameters, miscalculation of parameters etc. (Kuritzkes, Schuermann, & Weiner, 2002). Risk can result in large and unexpected losses and can really hurt the profitability of companies. However, risk is not always bad and little bit of risk can lead to better financial results. However, the relationship between risk and better results is a lot more complex and depends on ...

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, ...

Introduction

The United States established the Federal Reserve institution in 1913. This central bank was responsible for safeguarding the economy of the United States by raising and lowering the interest rates that the borrowers have to pay to the lenders (Grey, 2002). This paper will determine how exactly the Federal Reserve is controlling the interest rates. It also examines why the interest rates influence the broader economy of the U.S. However, before the establishment of the Federal Reserve Bank, there was economic panic, and this was caused by emergency banking that was the common events as the prospective investors would ...