xian hanseen pharmaceutical(china 2)

xian hanseen pharmaceutical(china 2) - to increase the...

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1. How significant an impact do foreign exchange gains and losses have on corporate performance at XJP? What is your opinion of how they structure and manage their currency exposures? If a firm’s business is related one country to another, there is a possibility either beneficially or harmful effect on the company caused by change foreign exchange rate. Also, this impact may significant to the corporate performance. Especially in this case, Xian-Janssen Pharmaceutical(China) and the Euro, XJP faces foreign exchange risks in form of transactional and operational exposures in the course of its procurement of raw materials and finished products importing from Johnson & Johnson’s in Europe to XJP in China. Even though XJP followed hedge policy to minimize the foreign exchange risk, XJP made 60 million foreign exchange losses in 2003. If XJP have similar loses in 2004, definitely they could not reach its annual targeted revenue. If XJP continues making losses because of change foreign exchange rate, then XJP will have
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Unformatted text preview: to increase the prices of its drugs. Finally, XJP may reduce its sales especially tender sales which is over 80%in total China market because its higher price. This foreign exchange environment that XJP faced may bring out a great gulf fixed to XJP in Future growth. To reduce its harmful effect of XJP currency exposures, the firm needs to focuses on reduction in risk future cash flow. The firm can improve planning capability by this way. The firm can cope with future financial problems or future unpredictable investment plan, if the firm can foresee future cash flow precisely. Also, the firm needs to focus risk management. The firm should make a right decision which exposures to hedge for reducing foreign exchange risk by risk management in practice. The reason is many firms are actively hedging not only backlog exposures, but also selectively hedging quotation and anticipated exposures....
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This note was uploaded on 10/20/2011 for the course FIN 500 taught by Professor Yi during the Spring '10 term at CSU Dominguez Hills.

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