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ACCT 310 UMGC Week 5 Foreign Exchange Rates Paper

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Accounting

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University of Maryland Global Campus

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Juan Varela
Week 5 Assignment 2
September 24, 2019
Mr. Dennis Mcguckian

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The more business you do outside the United States, the more currency instability you
should keep in mind. There are numerous ways that Striking fur can utilize to protect itself against
losses due to the increase in foreign exchange rates. To begin, Striking fur must understand and
managers should evaluate the status of the company. It would be ideal if Striking fur found a partner
within the United States to avoid exchange rates. Second, another way to protect itself from currency
exchange rates is to create more contracts to act as insurance. Third, should look into third parties
and subject matter experts that monitor the markets to provide with tips and timelines to better
protect you from unprecedented currency rate fluctuations. There are many tools available to assist
and prevent cash-flow losses.
First, according to Elizabeth Smith, the biggest currency risks occur when your costs are in
one currency and your revenue is in another. The more the international transactions made, the
higher the risks. These types of international transactions and business will expose your company to
currency fluctuations that can damage your company’s short-term cash flow. (Smith, 2018) If for
whatever reason the Canadian dollar rises more than the U.S. dollar, you will increase your overall
costs compared to your revenue. In which case, at that point might look for a domestic partner to
conduct business with. That way you will for the most part eliminate the currency risks. To counter
that point, however, suppliers within the U.S. will likely be more expensive compared to Canada, or
suppliers overseas.
Secondly, the Striking fur should hedge with forward contracts. Forward contracts are
agreements to buy foreign currencies at a set exchange rate through foreign banks. By creating
these types of contracts, you fix prices and guarantee that your future import prices will not increase,
however, there are drawbacks. By creating forward contracts, and fixing your future prices, you may
just hurt the company’s savings. If you buy at a fixed price and the currency fixes in your favor, you
must still honor the contract and buy at the higher negotiated prices. When creating future contracts,
you must research and anticipate the market fluctuations to make the best possible future contracts

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Juan Varela Week 5 Assignment 2 September 24, 2019 Mr. Dennis Mcguckian The more business you do outside the United States, the more currency instability you should keep in mind. There are numerous ways that Striking fur can utilize to protect itself against losses due to the increase in foreign exchange rates. To begin, Striking fur must understand and managers should evaluate the status of the company. It would be ideal if Striking fur found a partner within the United States to avoid exchange rates. Second, another way to protect itself from currency exchange rates is to create more contracts to act as insurance. Third, should look into third parties and subject matter experts that monitor the markets to provide with tips and timelines to better protect you from unprecedented currency rate fluctuations. There are many tools available to assist and prevent cash-flow losses. First, according to Elizabeth Smith, the biggest currency risks occur when your costs are in one currency and your revenue is in another. The more the international transactions made, the higher the risks. These types of international transactions and business will expose your company to currency fluctuatio ...
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