Overview Foreign exchange impacts the profitability of transactions in international

 

Overview

Foreign exchange impacts the profitability of transactions in international markets. It can turn a profitable business into one that loses money and can turn an unprofitable business into one that makes money.

In this assignment, you will analyze the impact of foreign exchange on different business scenarios and present your findings in a short business memo.

Scenario

You manage the international business for a manufacturing company. You are responsible for the overall profitability of your business unit. Your company ships your products to Malaysia. The retail stores that buy your products there pay you in their local currency, the Malaysian ringgit (MYR). All sales for the first quarter are paid on April 1st and use the exchange rate at the close of business on April 1st or the first business day after April 1st if it falls on a Saturday or Sunday. The company has sales contracts with different vendors that determine the number of units sold well in advance. The company is contractually obligated to sell 4,000 units for exactly 1.25 million MYR for the first quarter. The break-even point for each unit is $90 in U.S. dollars. Use the following foreign exchange rates:

  • On January 1, the daily spot rate is 3.13 MYR, and the forward rate is 0.317 U.S. dollars/MYR for April 1st of the same year.
  • On April 1, the daily spot rate is 3.52 MYR.

Prompt

Using the information above, create a short business memo that explains the profitability, viability, and importance of considering foreign exchange on the basis of the scenarios below.

Scenario 1: The company uses the spot rate on April 1st to convert its sales revenue in MYR to U.S. dollars.

Scenario 2: On January 1st, the company uses that day’s forward rate today to lock in a foreign exchange rate for its expected 1.25 million MYR in sales. This means the company agreed to exchange 1.25 million MYR using the forward rate on January 1st when April 1 arrives.

Scenario 3: Another option for the company is to spend the foreign currency and avoid any currency exchange. Because it is a manufacturing company, raw materials are always needed.

Specifically, you must address the following rubric criteria:

  • Foreign Exchange Calculations: Determine the profitability of the international business by using foreign exchange calculations for the first and second scenarios.
  • Spend or Save: Discuss what you would need to consider when determining if the company should buy raw materials with the foreign currency in an effort to avoid foreign exchange risk and whether this is a viable option for the company.
  • Conclusion: After determining the result for each scenario, explain the importance to a company’s financial results of considering foreign exchange risk.

Guidelines for Submission

Submit this assignment as a 250- to 300-word Microsoft Word document. Sources should be cited according to APA style.

Share This Post

Email
WhatsApp
Facebook
Twitter
LinkedIn
Pinterest
Reddit

Order a Similar Paper and get 15% Discount on your First Order

Related Questions

Select and discuss one Do, and one Don’t related to

Select and discuss one Do, and one Don’t related to physical activity during pregnancy. (#1_Do and Do Not) Evaluate the statement that “no level of alcoholic beverage intake is safe or advisable during pregnancy.” (#2_Alcoholic Intake) What is the relationship between childhood obesity and chronic diseases? (#3_Childhood Obesity) Explain why

Read the following articles: https://www.healthit.gov/topic/health-it-and-health-information-exchange-basics/what-hie https://www.sciencedirect.com/science/article/pii/S1110866520301365 https://journalofethics.ama-assn.org/article/electronic-health-records-privacy-confidentiality-and-security/2012-09 1. After reading

   Read the following articles: https://www.healthit.gov/topic/health-it-and-health-information-exchange-basics/what-hie  https://www.sciencedirect.com/science/article/pii/S1110866520301365 https://journalofethics.ama-assn.org/article/electronic-health-records-privacy-confidentiality-and-security/2012-09  1. After reading the assigned materials/ links and going through the lecture, you should be able to understand how electronic data storage and mapping is important for success in a healthcare entity. Select one question and provide a detailed response in a

what you would have done in these two situations. Given

what you would have done in these two situations. Given the situation, would you have done what the discussion question did in order to comply? Why, or why not?  __________________________________________________________________________________ An example of a time when I complied with an authority figure’s demands despite finding the request irrelevant to the

1) Summarize Hershey Company case study into 4 paragraphs. Do

1) Summarize Hershey Company case study into 4 paragraphs.  Do all 3 questions on pg 505 – Should Hershey be held ethically responsible for child labor conditions in the West African cocoa communities? – If it is not possible for Hershey to gain control of their supply chain for a

How importantly do you rate pupil motivation as a factor in learning success?

How importantly do you rate pupil motivation as a factor in learning success?Do you actively seek to motivate your pupils?  cover these points, please: 1- Colwell and Hewitt. 1, 2, 3.Extrinsic, Goal oriented, theory. Mastery. Performance. Avoidance. Self-concept . Self-esteem Intrinsic. High quality music, Wide repertoire. 2-Duke: The nature of

International versus U.S. Accounting Standards For this assignment, you will

  International versus U.S. Accounting Standards For this assignment, you will research and compare international and U.S. accounting standards. This will enable you to see how the different reporting methods affect business and how product costs are affected by international business.The learning objectives of this report are as follows: Compare

Population Modeling Exercise

 Assignment 4 will require the use of R and WiSP software. Please review the materials below. To receive credit for this assignment, you must upload a document file containing a screenshot that captures your results (showing that you input the appropriate data into WiSP through the final step of the

1- What are some of the primary reasons people resist

  1- What are some of the primary reasons people resist change? What are some of the ways a team leader can ensure that change is accepted or at least not resisted?.  2- Compare and contrast formal groups and informal groups. Explain the importance of leadership in both types of groups.  format

Analysis of Botticelli’s Primavera – Premium Paper Help

Premium Paper Help is a professional writing service that provides original papers. Our products include academic papers of varying complexity and other personalized services, along with research materials for assistance purposes only. All the materials from our website should be used with proper references.

Assignment Content Competency Assess the roles and impacts of various

CompetencyAssess the roles and impacts of various stakeholders within U.S. healthcare systems. Student Success CriteriaView the grading rubric for this deliverable by selecting the “This item is graded with a rubric” link, which is located in the Details & Information pane. ScenarioDue to your background as an expert consultant for

Select a major organization that was located with a major

Select  a major organization that was located with a major natural disaster  area, such as the Hurricane Katrina disaster area.  Research their  experiences and prepare a report detailing the unexpected challenges the  organization encountered in returning their operations to normal. Give  suggestions on what might be added to the organization’s contingency  plan to

Nutrition and Weight Status Review all the materials discussed in

Nutrition and Weight Status          Review all the materials discussed in this and the preceding module. After reading the information and guidelines, discuss why nutrition and weight status are important for health. Post one reference you used for the evidence-based information you are discussing. with substantial details that demonstrate an understanding

Case outline Peter Brown is a 58-year-old gentleman who has

   Case outline Peter Brown is a 58-year-old gentleman who has experienced an episode of crushing central chest pain while at work. Peter works as a taxi driver and a colleague has taken him to the Accident and Emergency Department. On admission, Peter is sweaty, clammy, nauseated and short of

Underrepresented Students in U.S. Study Abroad Programs

Underrepresented Students in U.S. Study Abroad Programs  Paper details 1. Introduction (roadmap to essay, proper thesis, & clarity) 15 (5pts per each) 2.Structure (flow between paragraphs and sections, development of an argument) 20 (10 pts per each) 3. Conclusion (bookending, linking back to thesis/introduction, suggests new avenues for research or

Instructions Gang Violence Prevention You are commissioned to speak to

Instructions Gang Violence Prevention You are commissioned to speak to your local community about gang violence prevention. The forum would also discuss the family’s role in preventing gang-related problems in children. Create an informational report for community distribution that includes answers to the following questions: Why do juveniles join gangs?