Understanding Exchange Rates And Their Impact On Management Financial Decisions.

3021 words - 12 pages

Understanding Exchange RatesSection I - IntroductionSection II - Definitions and ExamplesSection III - Systems and HistorySection IV - Government Interventions and their EffectsSection V - Effects of the Exchange Rate on International Trade RelationshipsSection VI - Other Related International Trade ConsiderationsSection VII - ConclusionSection I - IntroductionUnderstanding the relationships among world currencies is vital to successful operations in a global economy. There is money to be made by managers who can effectively manage exchange rates in the course of their business dealings. There is money to be lost by managers who fail to recognize the significance of these rate relationships.In an effort to better understand the affects of exchange rates, we need first to define the term exchange rate. This will require looking closely at the relationship between the exchange rate and global trade. We then need to discuss how these rates are determined and who sets the rate for each country. Then we will examine the impact of these rates, both good and bad. While examining the impact of exchange rate fluctuations we will complete cost comparisons of similar goods in the U.S. and in foreign markets and discuss the effect of rate changes on the international market. This will provide us with the opportunity to discuss some of the problems caused by exchange rate fluctuation and review how trade and national economies can be affected.With these discussions and reviews, we should be able to define and explain the exchange rate in layman's terms using everyday examples to demonstrate the differences in exchange rate and the potential for profit and loss as exchange rates fluctuate. The processes involved and the consequences of exchange rate fluctuations can be confusing. The importance of understanding at least the basics of exchange rates and international trade rules cannot however be overstated. The success or failure of individual investors, large corporations and even governments can be determined by accurately calculating and adjusting practices according to currency relationships.Section II - Definitions and ExamplesThe foreign exchange rate is the price relationship between the currencies of two countries. It is defined in The Manager in the International Economy as "the price at which the country's currency is exchanged for the currencies of other countries." That sounds simple enough but to clarify; let's look at a few examples, using this theoretical table.Using this chart, you could expect to trade 73 U.S. dollars for 86 French francs. To simplify this exchange, let's consider a visit to our neighboring Canada. When you cross the Canadian border from the U.S. you can exchange one U.S. dollar for about one Canadian dollar and thirty cents. That is the spot rate or the rate at which the currencies are currently trading. This rate is used by vendors near the border to make simple exchange of your U.S. dollar for Canadian dollars. If you eat...

Find Another Essay On Understanding Exchange Rates and their impact on Management Financial Decisions.

Australia's Exchange Rates and the effects from global events

1161 words - 5 pages country for Australia and some possible strategies to help combat these.WHAT ARE EXCHANGE RATESThe exchange rate can be defined as the price of a specific currency in terms of another currency. Exchanging currencies is essential for international transactions so countries can operate with their own currency. The method by which that price is determined depends on the particular exchange rate mechanism adopted in that country. Australia currently

McDonalds and Their Impact On Society

1621 words - 6 pages McDonald clown that was always very friendly and the happy meals that they serve with toys, which makes them consumers to the restaurant at a very young age (Stumpe 13). Also, it has been questioned on exactly safe beef even is. It has to do mostly with the animals. However, how they treat the animals directly relates to how healthy their food is, the company has promised to stop using growth-promoting antibiotics and use nutritional feed (Frizell 2

Impact of the Current Global Financial Crisis on Human Resource Management

2484 words - 10 pages management, 54(6), 361-368 Costa, J. (2004). The Portuguese Tourism sector: key challenges for human resources management, International Journal of Contemporary Hospitality Management, 16(7), 402-407 Dolan, S, Belout, A & Balkin, D. (2000). Downsizing without downgrading: learning how firms manage their survivors, International journal of Manpower, 21(1), 34-47 Fodor, P & Poor, J. (2009). The Impact of the Economic and Financial Crisis on HRM and

Financial Management and Planning

585 words - 3 pages To be a successful business owner, financial planning is instrumental in business if the owner desires to achieve insurmountable success for the long term. Financial planning in particular is concerned with the evaluation process of the business. Financial management is about establishing short and long term objectives for the business and deciding what resources will be required to achieve the necessary objectives. The primary goal for

Risk Management and The Foreign Exchange Market

4993 words - 20 pages account at the pricing stage of proposals.What impact could currency exchange rate movements have on your balance sheet?Who decides whether to hedge exposures, and is there an appropriate policy? You should clearly differentiate between actions taken to protect the position (hedging) and actions taken to generate profit (speculating).Are decisions being made using timely and accurate information?Will any of your exposures ' net off '.2.4.4 Invoicing in

Individual Differences and Traits and Their Impact on Leadership Practices

2898 words - 12 pages factor for any leader to become more effective and to make his organisation perform better.Several studies were conducted during the past two decades regarding the impact of value systems on organisation's performance. In general, nine companies that satisfied three important criteria were studied. Criteria were the following: companies had to have a statement of their company values; to have certain mechanisms to ensure that they put the values into

International Financial Management: Collect foreign exchange spot and forward rate data and interest rate data for two currencies; examine whether CIRP holds

1645 words - 7 pages membership to find out the data for the essay - the information used in this work are found on Patricia online webpages. The Czech Crown is not common, large and frequently traded currency, I have used in this work the indirect quotation.This essay connects a theory with imagining a situation which poses a reality and is based on the facts (real foreign exchange rates and interest rates). First of all I will briefly explain the situation of the

Corporate Interests and Their Impact on News Coverage

2328 words - 9 pages Corporate Interests and Their Impact on News Coverage Hypothesis There is no denying that news media is big business. The complete coverage of stories and investigative reports are certainly at risk with the rise of media as a business, rather than strictly a service to the public. Over the past few years, there have been a number of cases where television stations or news publications have killed news stories or forced reporters to

Regional Trade agreements and their impact on globalisation

2163 words - 9 pages unions. These are common markets where the level of integration is more developed and far more sophisticated. Member states that are party to such a union may adopt common economic policies e.g. the Common Agricultural Policy (CAP) of the European Union they may have a fixed exchange rate regime such as the ERM of the EMU and they may even decide on a single common currency. The ultimate act of integration is likely to be some form of political

Seeing Eye Dogs and Their Impact on the Blind

1788 words - 7 pages Imagine living your life in complete darkness not knowing where your next step will lead you or if you are about to encounter danger. The blind receive help from Seeing Eye dogs. This allows blind people to be safe and not get themselves into dangerous situations. Without Seeing Eye dogs, blind people wouldn’t get around as easily. Seeing Eye dogs, through their strong characteristics, intensive training and physical help have a huge impact on

Modern Defense Technologies and their Impact on Society

1042 words - 4 pages A Look at Modern Defense Technologies and their Impact on Society As a veteran of the Air Force I’ve had a chance to both witness and work with some of these technologies that I will be discussing throughout this paper. I had a chance to be trained for using a CMOS based program for planning loads on aircraft. The program was very user friendly and fast. This program handled the mathematical part of loading planes such as weight, size, and

Similar Essays

How Exchange Rates Are Determined And Their Impact On The Australian Economy

1383 words - 6 pages composition of the basket. Changes to the weights are usually calculated inSeptember, with the re-defined index spliced onto the existing TWI on the first business day in October.Exchange rates allow individuals, businesses and governments to buy a foreign currency for importing, investing, travelling, etc. This currency conversion occurs in a foreign exchange market (otherwise known as a forex market). In most financial papers, currencies are

Business Report On The Different Financial Institutions In Australia And Their Different Rates

1358 words - 5 pages Executive Summary:In my business report I will be stating and discussing the five major financial institutions in Australia. I will be giving detail on one in particular and the different types of loans available to consumers. I will also inform consumers on the rights and responsibilities of borrowers who take out a loan. I will also compare and evaluate the four different types of credit cards available, their intrest rates, the annual fees

The Impact Of The Euro On Financial Markets And Their Participants

2818 words - 11 pages transaction costs. Such pressures on costs and revenues have prompted mergers between exchanges. Evidence of this is provided by the newly created Euronext exchange, a combination of the Paris, Lisbon, Brussels and Amsterdam exchanges.Companies continuing to use financial marketsFor companies continuing to use the financial markets, the Euro signals the opportunity to market their securities/shares to a wider pool of investors who may previously

Managing Financial Resources And Decisions Essay

3418 words - 14 pages Diploma in Management StudiesTable of ContentsPagesIntroduction 3-3Report ContentTask 1, Sources of FinanceIdentify the sources available to the Business 4-4Implications of different Sources of Finance 5-10Choosing the appropriate source of finance for the business 10-10Task 2, Finance as a Resource2.1 Assessing and comparing the cost of selected sources of Finance 11-122.2 Importance of Financial Planning 13-132.3 Information needs of different