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?
Explanation & Answer
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Outline
Introduction
Body
Conclusion
References
Running head: DISCUSSION
Discussion
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DISCUSSION
2
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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