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Q-200 wordWhat types of businesses are most exposed to currency fluctuations?  To fluctuations in the costs of supplies? To fluctuations in the costs of there finished products?The sharp slide in emerging-markets and the marked pickup in currency volatility following the financial crisis of 2008 and 2009 have forced many companies to work overtime to protect their bottom lines. To hedge their currency exposure or protect against the impact of exchange rates, these companies use financial derivatives. Although the use of derivatives helps offset risk, an unexpected event can still cause financial hemorrhaging.  On January 1, 2011, the Venezuelan government established a fixed rate of 4.30 per dollar. Again, on February 13, 2013, the currency was further devalued to a rate of 6.30 per dollar. This change caused many companies to take large charges on the remeasurement of their Venezuelan operations.Currency devaluation charges not only distort GAAP numbers by lowering operating earnings, but also artificially boost reported earnings. In other cases, currency devaluation charges artificially depress reported earnings and make a stock look overvalued.Many US companies incurred a charge as a result of the Venezuelan bolivar devaluation. Here’s a list.CompanyVenezuelan Bolivar Currency Charges (in $mm)2014Coca-Cola$247Proctor & Gamble$280Ford Motor Company$350  2013 Ford Motor Company$186Colgate- Palmolive Company$172Directv$166Merck & Co Inc.$140PepsiCo Inc.$126Halliburton$30References:JWMI 531. Lecture 1 W8. Risk Management Tools: Hedging Strategies.McGrath, M. (2014). Venezuela, Argentina currency devaluations hit P&G expected sales and earnings. Forbes. Retrieved from http://www.forbes.com/sites/maggiemcgrath/2014/02/11/venezuela-argentina-currency-devaluations-hit-pg-expected-sales-and-earnings/Naughton, K. (2014). Ford to Take $350 million charge on Venezuela devaluation. Bloomberg. Retrieved from http://www.bloomberg.com/news/2014-04-01/ford-to-take-350-million-charge-on-venezuela-devaluation.htmlTrainer, D.  (2014). Currency fluctuations bite both ways. Forbes. Retrieved from http://www.forbes.com/sites/greatspeculations/2014/03/31/currency-fluctuations-bite-both-ways/
Strayer JWI531 week 8 discussion

Strayer JWI531 week 8 discussion

Question # 00023777 Posted By: mac123 Updated on: 08/21/2014 06:06 PM Due on: 08/26/2014
Subject Finance Topic Finance Tutorials:
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What types of businesses are most exposed to currency fluctuations? To fluctuations in the costs of supplies? To fluctuations in the costs of there finished products?
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