Healthy Life Company Founded in 1997, is a family-owned enterprise that imports and exports medical supplies. The
Question:
Healthy Life Company Founded in 1997, is a family-owned enterprise that imports and exports medical supplies. The company exports its medical supplies to the following regions, 50% to Europe 30% to North America, and 20% Middle East.
In 2019, the company's sales reached USD 13.2 million, compared with the previous year's sales in 2018 were flat and operating income was declining. However, by the end of 2019, the sales started to increase gradually, due to the global COVID-19 pandemic and the high demand for N95 masks.
Imagine yourself as the CFO of the company, as per your position you are proposing to the board of directors your plan as follows: hedging the company position into currency derivatives, to protect the company from the high volatility in the currency market due to the Russian and Ukrainian war. The table below shows the payment due during the current year (2022):
Date | Currency | Amount | |
USD | 5,750,000 | Cash available in bank | |
15/4/2023 | EUR | 2,230,500 | Inflow |
28/4/2023 | GBP | 4,250,000 | Outflow |
2/5/2023 | JPY | 3,580,000 | Inflow |
12/5/2023 | EUR | 5,000,000 | Outflow |
Describe and evaluate the currency movement (GBP, EUR, KWD, JPY, and USD). How is the value of each currency determined and why do they move against each other and provide graphs too? Also provide references for each and intext citing ?
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey