Discussion

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Q2006gnznxybr

Business Finance

Description

Suppose a U.S. wood-products company has facilities and employees in

Canada providing its raw materials (wood), but has most of its sales in

the United States.



(1) What are the most important operational

and financial risks in this arrangement? (2) How can the company pay its

Canadian employees, who presumably want Canadian dollars, when its U.S.

customers are paying in U.S. dollars? Furthermore, how can it calculate

its profit if revenue is in U.S. currency and most of its costs are in

Canadian currency?

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Explanation & Answer

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Outline

Introduction
Body
Conclusion
References


Running head: DISCUSSION

Discussion
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DISCUSSION
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The Operational and Financial Risks from the Arrangement
From the situation under evaluation, the United States wood products corporation has the
employees and facilities in Canada whereby it provides its individual raw materials. However,
most of the sales of the organization are based in the United States. It is imperative to denote that
the United States is likely to face both operational and financial problems from the arrangement
of its operations. One of the financial risks regarding the arrangement is the interest rates risk.
The alteration of the interests’ rates of Canada can have an impact on the operations of the
United States Company (Maria, 2009).Ideally, this is because the interest rates are prone to
change and therefore they can ad...


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