Foreign Exchange Exposure

This ppt includes Foreign Exchange Exposure where types of Foreign Exchange Exposure are explained

1. Under the guidance of Sundar B. N. Asst. Prof. & Course Co-ordinator GFGCW, PG Studies in Commerce Holenarasipura Presented by, H.G.Gayathri 2 nd M.con G.F.G.C.W. Holenarasipura . Under the guidance of Sundar B. N. Asst. Prof. & Course Co-ordinator GFGCW, PG Studies in Commerce Holenarasipura

2. Foreign Exchange Exposure Meaning: Foreign exchange exposure is defined as the degree to which the company is affected by exchange rate change. Foreign Exchange Exposure occurs because of the unanticipated change in the exchange.

3. Types or methods of foreign exchange exposure

4. 1}Translation exposure

5. A firm has a mortgage on real estate in a foreign country.  Foreign currency increases in value versus home currency. Real estate is physically unchanged but, Book value of real estate liability increases in home currency. Liability translation exposure

6. Asset translation exposure A firm holds inventory valued in a foreign currency. Foreign currency declines in value versus home currency. inventory remains the same but, book value of inventory declines in home currency.

7. 2}Transaction exposure

8. Management of transaction exposure

9. Key differences between the transaction exposure and translation exposure. The key differences between the transaction exposure and translation exposure is that the transaction exposure impact the cash flow of the firm virus translation has no effect on direct cash flows.

10. How to reduce translation and transaction exposure?

11. 3}Economic exposure

12. Technique to reduce economic exposure

13. Conclusion In today's globalized world, every business firm irrespective of foreign trade feels the heat of foreign exchange exposure and it needs to be managed to carefully in order to keep the companies value, future cash flow and competitive position intact. FEE affect the MNCs directly while the effect on others is indirect. Hence managing FEE is a must for maximizing the firm's value and minimizing the risk.

14. True or false: Exchange rate is the rate at which domestic currency can be exchanged for a foreign currency. -True Taxable exchange rate is related to uncertainty of the market. -True Forward Market allows hedging. -False

15. Fill in the blanks. In case of_________of domestic currency, less rupee are needed to buy one US dollar market. (Depreciation/appreciation) ________is the price of the currency of one country in terms of the currency of another. (Exchange rate/managed floating)

16. https://youtu.be/USTRDhZrSfE https://youtu.be/1EkDeeGJCNo