Read the following and give response:

Cash flow management is key focus of a business. It is face on a daily basis on how to minimize the risk of foreign exchange exposure and how to control it.

Consumers spending affect the demand and supply of currency. If there is more demand for currency but there is not enough supply, the value of the currency will go up and vice versa.

When economy is down or there is recession, consumer spends less and so is the trading. The situation results in depreciation of the country’s currency. The interest rate will go down to encourage spending to boost the economy but investors will hesitate to invest more money knowing the return is low. The trading and investment will be focus on other countries with high interest yield.

As a country experience recession, unemployment increases which results to slowing economy and devaluations of the currency. Economic growth will be affected as consumers’ wages is not enough to buy goods.

Because consumers do not spend enough money to support trade and economic growth, manufacturers will have to cut on import and export to minimize cost and maximize profit. Overall the value of the currency depletes because of recession.

On the other hand, lower interest rate encourages consumers to invest, borrow money, and spend more. The demand for currency will increase.

Recession or inflation, management is face with dilemma on how to react and manage currency movement that affects their business. Cash visibility is one way to manage short run operating environment. Cash visibility can be managed by working with the banks. Banks have technology that can provide a company the information of their financial activity and the current currency movement. Banks recording and reporting tools can provide accurate and real time information as to the cash status of the company. Knowing what the cash status of the company, the management will be able to assess the risk to help plan and execute the necessary steps to protect its holdings.¨

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Considering the factors that affect currency movement or fluctuation short run ... View the full answer