Winsory Winery Pty received an order for wine worth R750 000 from a company in Netherlands that stopped importing from the company 5 years ago. During the time that the two companies had good working a relationship, Winsory Winery Pty would use an open account as a method of payment and payment was expected 60 days from day of shipment. Over the years the wine market has become a buyers' market with more wineries entering the market in South Africa. 

Answer the questions that follow based on the scenario provided 

a. Argue why an open account is not a suitable form of payment in this case. 

b. Critically evaluate 2 foreign exchange risk that Winsory Winery is exposed to until the payment is done in 60 days. 

c. Critically evaluate two methods that can be used to hedge the risk exposure [Your answer should be relevant to the scenario provided. Provide justification of why the method selected is appropriate.

Answer rating: 100% (QA)

a An open account is not a suitable form of payment in this case due to several reasons Risk of NonPayment Given that the company from the Netherlands ... View the full answer