S dollars at embraer hill 1993 revenues collected

  • No School
  • AA 1
  • 5

This preview shows page 3 - 4 out of 5 pages.

requirement for aircraft manufacturers globally, jet parts were priced in U.S. dollars at Embraer ( Hill, 1993). Revenues collected from the sale of the jet parts were in U.S. dollars, which after conversion to Brazilian Reals, reduced. In this case, Embraer realized lower profit margins after sales of jet parts, which were priced using U.S. dollars, as the returns were converted to Brazilian Real. Moreover, Embraer is exposed to foreign exchange risks as the currency rates fluctuate unpredictably over time. Depending on the economic performance, the rate of exchange of the Brazilian Real against the U.S. dollar may change over time. Despite making investments in the foreign exchange markets, the platforms do not offer complete insurance against currency fluctuations ( Hill, 1993). Embraer can buy forward contracts, where the company can use exchange rates determined early to cover for future risks. The strategy focuses on the expected appreciation of the local currency against the U.S. dollar. However, the company suffered a loss when the Real depreciated, while Embraer had signed forward contracts ( Baer & Love 2017). To avoid the risks associated with currency hedging, Embraer can investigate the trend of inflation in the country to determine appropriate moments to sign forward contracts in the future. Also, spot exchanges can be applied during sales by short-term prediction of the Real value against the U.S. dollar. As instant exchange rates control the number of sales, the company should set an average proportion of the Real against U.S. dollar to regulate the sensitive prices of goods.
Image of page 3
Image of page 4

You've reached the end of your free preview.

Want to read all 5 pages?

  • Fall '19
  • Exchange Rate, Foreign exchange market, United States dollar

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors