Daniel Previously Worked in a Law Firm and His Present Job

Question 1 (14 marks) Daniel previously worked in a justice securely and his present job is as an accountant accomplice in an overseas trading political party. The companys brain accountant believes that the companys boilers suit point in time of consummation exposure is high and would like to have the details from Daniel. Daniel has asked you to let off the following questions to him beca physical exercise you are taking a course in international financial management: a For a position currency, what are the main factors that affect the companys degree of transaction exposure? Why? (6 marks) There are distinguishable types of risks that determines the degree of exposure. There is transactional risk which is the risk that currency telephone exchange pass judgment will change after the companies have already entered into financial obligations. Such exposure to fluctuating exchange ranges can lead to major losses. Often, when a company identifies such(prenominal) exposures, it will choose to implement a hedging st straddlegy, utilise forward rates/FXO to lock in an exchange rate and thus eliminate the exposure to risk. Translation risk may also occur meaning that a companys equities, assets, liabilities or income will change in value as a result of exchange rate changes.

This occurs when a firm denominates a portion of its equities, assets, liabilities or income in a foreign currency. Accountants use various methods to insulate firms from these types of risks, such as consolidation techniques for the firms financial statements and the use of the most effective cost news report evaluation procedures. In many cases, this exposure will be recorded in the financial statements as an exchange rate gain (or loss). Macroeconomic wise, there is economic risk that pertains to the overall business. An exposure to fluctuating exchange rates, which affects a companys earnings, hard cash flow and foreign investments. The extent to which a company is moved(p) by economic exposure depends on the specific characteristics of the company and its industry.... If you want to get a full essay, order it on our website: Orderessay

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