...Mitigating Exchange Rate Risk FIN /370 Aug 12,2013 Mitigating Exchange Risk MSMEs are exposed to many forms of risk in their course of business, such as interest rate risk, foreign exchange risk, and natural disasters. These could result in financial loss and minimize their profit. Since MSMEs work on tighter budgets than larger firms, and have weaker capital base, losses through exposure to various risks can result in more severe impact on profits and operating efficiencies for MSMEs than for large firms. (Export) Foreign exchange risk in particular, impacts firms engaged in exporting, importing, and borrowing in foreign currency. Rupee appreciation benefits importers as it decreases rupee prices of imported goods and harms exporters as it increases foreign currency prices of exported goods. Rupee depreciation harms borrowers who take loans in foreign currencies that are cheaper than Indian loans. (Export) Since currency fluctuations adversely impact MSMEs, they should determine their risk exposure to various currencies, as well as adopt risk mitigation strategies and methods. • (Export)The currencies to which the firm is exposed to • The extent of sales / purchases /receivables / payables denominated in foreign currencies • The extent to which price fluctuations can be passed on to customers (by increasing price or by entering price variance clauses) • Cash flow position of the firm and ability to withstand...
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...Initial Public Offerings Name: FIN 370/Finance for Business Date: Initial Public Offerings Private companies transform into public companies to expand and attract investors. To do this they begin selling common stock to institutional investors who then sell the stock to the general public through a securities exchange. According to Mayo, 2012, “If this sale is the first sale of common stock, it is referred to as an initial public offering (IPO).” In this essay, we will attempt to describe the initial public offering for the global firm, Facebook, Inc. We will describe the role of the investment banker and underwriter, the role of an originating house and a syndicate, explain the pricing of the issue, discuss some of the risks involved in the public offering and how the securities laws deal with them, and discuss any foreign exchange risks the company can face with ideas about how to mitigate them. The first thing Facebook needed to do to launch their IPO was to hire an investment banker and an underwriter. Facebook hired thirty-three investments banks who acted as brokers to bring together individuals with funds to invest in Facebook. The underwriters in those investment banks together with Facebook agreed on a certain amount to raise on the IPO. Their underwriters provided several services, but the main role is basically to take responsibility of selling those shares to investors. If they fail to sell the shares, they still owe the agreed amount to Facebook. The investment...
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...Initial Public Offerings Barry England, Steven Nesbit, Clifton Hall, Miguel Villanueva, and John Warren FIN 370/Finance for Business October 27, 2014 Gabriel Renero Initial Public Offerings Private companies transform into public companies to expand and attract investors. To do this they begin selling common stock to institutional investors who then sell the stock to the general public through a securities exchange. According to Mayo, 2012, “If this sale is the first sale of common stock, it is referred to as an initial public offering (IPO).” In this essay, we will attempt to describe the initial public offering for the global firm, Facebook, Inc. We will describe the role of the investment banker and underwriter, the role of an originating house and a syndicate, explain the pricing of the issue, discuss some of the risks involved in the public offering and how the securities laws deal with them, and discuss any foreign exchange risks the company can face with ideas about how to mitigate them. The first thing Facebook needed to do to launch their IPO was to hire an investment banker and an underwriter. Facebook hired thirty-three investments banks who acted as brokers to bring together individuals with funds to invest in Facebook. The underwriters in those investment banks together with Facebook agreed on a certain amount to raise on the IPO. Their underwriters provided several services, but the main role is basically to take responsibility of selling...
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...company would have if they were to expand. First of those options would be to go public through an IPO or Initial Public Offerings. The second option would be to acquire another organization in the same industry in order to expand the business. The third and final option being to merge with another organization. With all three of these options having strengths and weaknesses, this paper will discuss some of the strengths and weaknesses of each and what opportunities may arise from each approach as well as the threats. Other things that this company may want to consider when looking to expand are the effects of globalization on the company's financial decision as well as the factors that contribute to exchange rate risks. Finally ending the paper with mitigating the exchange rate risk. Going Public through an IPO Taking a business public or better known as participating in an initial public offering is a process where the business is offered to the public by selling stock of the company. In turn, these stocks represent a partial ownership in the company to the individuals that purchase the stock. One common step in deciding whether or not to take a company public it is always best to speak with an IPO consultant to help determine the market prospects for the company before proceeding. Acquiring another Organization Acquisitions seem to be a big focus when it comes to the media and there can be some great advantages to acquiring an organization in the same industry. There...
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...additional manufacturing plants in Georgia, Michigan, and China. Products include plastic beverage containers, custom plastic parts, and plastic fan parts. The company is a leader in the industry of plastic injection molding. (Virtual Organization Portal, 2012) Riordan Manufacturing wants to expand operations and they have three options when considering expansion. The three options are going public via IPO, acquiring another organization in the same industry, or merging with another organization. The company must consider the strengths, weaknesses, opportunities, and threats of each option before making a final decision on how to expand. Additionally, considerations on the financial effects of globalization, exchange rate risks, and mitigating the exchange rate risks should be analyzed if the company decides to go international. Strengths Riordan manufacturing is looking for ways to expand their business. They narrowed it down to three options which are going public through an IPO, acquisition of another organization in the same industry, or merging with another organization. Riordan executives are taking in consideration the strengths of each option. If Riordan chose to go public through an IPO they will be able to generate revenue that can be used to fund growth plans. In addition, this will create liquidity for owners and potential investors therefore strengthening the company’s marketability. Another...
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...Running Head: INTERNATIONAL FINANCE International Money and Finance [Name of the Writer] [Name of the Institution] International Money and Finance Introduction This research is about the impacts of International Finance on performance of any global organisation. It is also known as Multinational Finance, which deals with, the exchange rate, Balance of Payments, economic and cultural exposures (Melvin & Norrbin, 2012. pp. 24). The organisation, which I will, analyze in this paper, is Ultra Electronics Holdings Public Limited Company which is a UK-based multinational organisation and listed in London Stock Exchange. The firm incorporated on June 25, 1993 with the name of Oval Limited. The firm changed its name to Ultra Electronics Holdings Limited on August 27, 1993. On August 30 1996, the company adopted its present name. The firm went public on August 30, 1996 by floating shares in the London Stock Exchange (Ultra Electronics, 2013). After showing constant growth and development for several decades, Ultra is now working in Defence, Security and transport and energy sector. It is Ultra’s utmost priority to gain access to the world’s top two defence budgets, which are the United Kingdom and the United States. Ultra earns almost half of its profits (nearly 49%) from North America. United Kingdom market produces about 29% of the profits. The firm generates 9% of the total profits from Mainland Europe while the rest of the world generates 13%...
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...Introduction Baderman Island Resorts is a place to go for a nice get away for the family because of the atmosphere and the different locations. When one takes a look into the company he or she will find that it is not what he or she would think of concerning the finances. Baderman Island Resorts has its positives as well as its negatives. There are quite a few reasons for this company to be border line of going under. There are a few reasons explained below. Baderman Island Resorts Pro’s and Con’s Baderman Island Resorts is a line of hotels and resorts that has three different locations. The strengths for this company is that it has a mixed variety of properties each with different amenities and can be accessed differently as well. Unfortunately, besides what the hotel offers there are more negatives than positives for this company. Baderman has gone through quite a bit of managerial changes that have brought disorganization to the company. Each manager brought something different to each hotel that has made consistency within the organization nonexistent. The only thing the Baderman Management Company has kept consistent has been how to book rooms and each guest has a uniform check-in process. Each managerial change has affected the profit margin for the Baderman Management Company as well. The organization and storage of data varies from resort to resort. Within the organization some use a paper backup system and others use a digital database. The biggest negative...
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...of equity (40%) and 60% of debt to finance the project’s $2.425 billion total cost. The financial advisors, Citicorp and Credit Suisse First Boston, used a multi-pronged financing strategy to raise debt from commercial banks, development agencies, and bond investors. In the end, the sponsors raised $450 million in bank finance and $1 billion in Rule 144A bonds, all of which was non-recourse to the sponsors following completion of the project. The decision to finance this deal on a project basis was actually a dual decision regarding both financial and organizational structure. Risks analysis The purpose of this paper is to analyze how the sponsors allocated both contractual and residual risk in the Petrozuata deal. There are four general categories of risk: precompletion risks, operating risks, sovereign risks, and financing risks, but in this paper I will talk just about the last two risks, as being principal part of my contribution to the group case analysis, so here I am going to present the information found that I used while...
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...Multinational Corporation, any advantages/drawbacks, and give examples. What reasons does the author of your text give for becoming a multinational corporation? 2. Discuss the Exchange Rate, Market, and Legal/Political risks that foreign investors confront. 3. Explain the theory of Comparative Advantage, and its implication for production and trade. Are there some countries that have no comparative advantage? What happens if two countries have exactly the same skill, technology, and labor costs? How could comparative advantage explain the overseas shift of manufacturing and the outsourcing of labor? Does it provide the sole explanation, or are there other causes? (If so, discuss.) 4. Discuss the formation of the European Union, and the introduction of the Euro. Discuss the key legal and financial steps did they take to achieve the EU and enter into a common currency, and the challenges they faced (include a timeline). 5. What are the advantages to being in the EU and adopting the Euro (two separate issues)? What are the chief drawbacks (EU and Euro, economic and political)? Why hasn’t England, Norway, Sweden, or Switzerland adopted the Euro? Which are EU members, and why did the others not join the EU? 6. Imagine that you are a trader working for a New York bank. The spot exchange rate against the Canadian $ is...
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...together and in bad times they all fall together. In the second economy, stock returns are independent - one stock increasing in price has no effect on the prices of other stocks. Assuming you are a risk-averse and you could choose one of the two economies in which to invest, which one would you choose? Explain. Prepare a brief report on your conclusions and illustrate with examples. Answer: I would opt for second economy, as in that economy I will have a ease of diversification which will help in mitigating risk. To design the investment portfolio of it is important to analyze different aspects which are the time for which the funds are being committed for the future needs, the expected rate of inflation and the expected payment that is likely to receive in the future. It is important to diversify your portfolio, so it is advised to focus on investing in different assets as it helps in mitigating risk and giving us adequate returns. Investing in the second economy will help in diversification, distributing the wealth among different countries and classes which will help in providing the best returns by strongly focusing on the attributes and characteristics of the asset and the returns that are likely to be earned from the same. Example: Investing in different moderate to high risk investments with a strong focus on investment in equity which will include foreign as well as domestic equity exposure which will range approximately 60 to 70 percent of the total portfolio along...
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...Global Financing and Exchange Rate Mechanisms Michael C. McGee MGT/448 November 6, 2012 Ian Finley Global Financing and Exchange Rate Mechanisms Globalization is ushering in tremendous business opportunities, competitive advantages, and greater profitability for companies that choose to set up operations in foreign countries. However, along with these opportunities come various risks to these companies. One of the main risks these companies will face is foreign currency exchange rate risk. Companies that plan to set up operations in a foreign country must exchange its domestic currency into the currency of the host nation to buy the necessary building materials, supplies, and other necessary resources that the operations will require (Hill, 2009). For example, if a U.S. company desires to set up operations in the country of China, it will have to exchange U.S. dollars currency into Chinese currency-the Yuan. If a company in Japan wants to set up operations in Spain or Italy, it would have to exchange its currency- the Yen into these countries’ currency, which is the Euro. The foreign currency exchange rates between these countries consistently fluctuate causing one to appreciate or depreciate against the other. The unpredictable movement of the foreign currency exchange rates can have adverse effects on a company’s investments, and profits that have operations in a foreign country. Foreign companies with operations in the U.S. normally convert the dollars it earns back...
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...different and I think his company had a different name. Financial Analysis Task 5 Notes: By careful of changing storyline and excel data. The principles and verbage remains. Custom Snowboards, Inc. Presentation to CFO A1) Summary Introduction Custom Snowboards Inc. is located in Minneapolis, Minnesota, USA. Their current sales are divided as follows:. Currently, 20 percent in the European market, 5 percent in the Canadian market and the majority or 75 percent of sales are in the United States market. Currently there are small warehouse and administrative facilities in both the European and Canadian markets to service respective customers. Four years ago the company offered shares of the company on the public Midwest Stock exchange. Jim Swartz, the founder retained 51 percent of the available shares. Custom Snowboards Inc. management is evaluating a more aggressive market position in the European market. Among the strategies for an increase in market share is to acquire an already established European manufacturer that desires to be acquired. The European Snowfun, Inc. acquisition would require a loan from a bank, for one million dollars. A bank is performing due diligence and requires an appropriate presentation before determining a decision. The terms of the one million dollar loan are: 6.75 percent Apr interest, 60 month term and a $300,000 compensating balance fund. This fund is non-interest bearing, the bank is trustee for use at their discretion for other...
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...IS/CFS/BS and give your comments Observe the translations gains or losses if any The consolidated revenue for Infosys in FY 2010 is Rs. 22,742 cr with a Year on Year growth of 4.8%. As per IFRS, the annual revenues stood at US $1,313 million, with a Year on Year growth of 2.5%. Sensitivity of INR against USD For every 1% change in INR against USD, the operating margin was affected by 0.4%. Accounting Policy of Foreign Exchange Transactions – Infosys Some salient features of the accounting policies of foreign transactions at Infosys are as follows: * All currency translations are done into the relevant functional currency at the exchange rate which is in effect on the Balance Sheet date. * Any gains (losses) due to the currency translations are included in the Income Statement. * The non-monetary assets and non-monetary liabilities are reported at their fair value. They are translated at the exchange rate on the date when the fair value was determined. * All transactions are translated into the functional currency at the exchange rate on the date of the transaction * All profits (losses) that have resulted due to the foreign currency translation are included in the income statement. Functional Currency – Infosys The functional currency for: Indian Rupee Infosys Infosys BPO Respective Local Currencies Infosys Australia Infosys China Infosys Consulting Infosys Mexico Infosys Sweden Infosys Brazil Infosys Public Services Infosys...
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...Investment Management, • Exchange Student Abroad: Recanati School of Management: January 2008 – May 2008 York University Bachelor of Arts, Economics (Hons.), Dean’s list: May 2006 • York University entrance scholarship (for academic excellence, Sept 2001) Toronto, Canada Tel Aviv, Israel Toronto, Canada EXPERIENCE Swap Trader, Toronto Dominion Securities • Swap & FX Trader: August 2009 - Present London, England Trading Interest Rate Derivatives: Full-time position trading interest rate swaps, FRAs, cross-currency swaps, gilts, FX as well as corporate bonds. Eurobond debt issuance combined with asset swapping to clients’ domestic currency facilitating low funding rates, mitigating currency and interest rate risk. Worked closely with origination and syndication team to issue Eurobonds. Sales and Trading Rotating Associate, Toronto Dominion Securities: August 2008 – August 2009 • Accepted into a highly competitive 16-month program (12 of approximately 1000 applicants) consisting of rotating throughout the institutional dealing room trading each of the Bank’s products for four month intervals. o Corporate Finance: May 2009 – August 2009 London, England Providing large loans to multinational corporations in order to generate ancillary business for the bank. Responsible for researching companies/industries, determining credit risk and subsequently appropriate funding rates. Accustomed to meeting CFO’s / Treasury personnel of high-grade corporates. Foreign Exchange Sales: January 2009...
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...1 CHAPTER 1 INTRODUCTION Risk management structure should be well thought-out, as well as a cultural fit and sustainable. (Smiechewicz, 2001) Uncertainty is not measurable. Risk is. - Frank Knight, Risk, Uncertainty and Profit (1921) 1.1 Introduction Success in business, to a certain degree, requires owners and managers to take calculated risks. The most successful business is usually managed by people who know when to push forward and when to pull back, when to buy and when to sell, when to stand firm and when to compromise. The successful company is managed by people who understand what risk in business is, and how this risk should be managed and mitigated. Risk is an undeniable reality of doing business today, whether domestically or globally. A successful entrepreneur does not fear risk, but strives to understand it, to manage it, even to take advantage of it. As risk management tools and techniques become more and more complex, however, companies require the services of a Risk Management specialist. A growing specialty in this field, globally, is that of international accounting risk management. International accounting professionals can contribute to the 2 success of their companies must have a strong grasp of financial risk management techniques for multinational and multilateral business transactions of great complexity. Unfortunately, as the world of business becomes increasingly borderless, risk management becomes, likewise, borderless, and...
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