ch10 - 1 Multinational Financial Management Alan Shapiro 9...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1 Multinational Financial Management Alan Shapiro 9 th Edition J.Wiley & Sons Power Points by Joseph F. Greco, Ph.D. California State University, Fullerton 2 CHAPTER 10 Measuring and Managing Translation and Transaction Exposure 3 ALTERNATIVE MEASURES OF FOREIGN EXCHANGE EXPOSURE I. ALTERNATIVE MEASURES A. TYPES 1. Accounting or Translation Exposure: arises when reporting and consolidating financial statements require conversion from subsidiary to parent currency. 3 4 How Translation Risk Arises Translation Risk Subsidiary Financials Subsidiary Financials Subsidiary Financials Headquarters' Consolidated Financials $ Japan United States Germany 4 5 Economic Exposure 2. Economic Exposure: arises because exchange rate changes alter the value of future revenues and costs. 5 6 ALTERNATIVE MEASURES OF FOREIGN EXCHANGE EXPOSURE Economic Exposure = Transaction Exposure + Operating Exposure Operating Exposure arises because exchange rate changes alter the value of future revenues and costs. 6 7 ALTERNATIVE CURRENCY TRANSLATION METHODS I. FOUR METHODS OF TRANSLATION A. Current/Noncurrent Method 1. Current accounts use current exchange rate for conversion. 2. Income statement accounts use average exchange rate for the period....
View Full Document

This note was uploaded on 01/24/2011 for the course FINS 5516 taught by Professor A during the Three '10 term at University of New South Wales.

Page1 / 27

ch10 - 1 Multinational Financial Management Alan Shapiro 9...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online