StudentShare solutions
Triangle menu

The task is to review EuroJet's foreign exchange exposure - Coursework Example

Nobody downloaded yet

Extract of sample
The task is to review EuroJet's foreign exchange exposure

In addition to this, as has been noted in the case study that the company plans to opt for one of the two options for expansion, which include expansion of network to intercontinental destinations and growth of existing network, the report also provides an evaluation of the risks associated with these two options in terms of foreign exchange risk and international environment risks. Besides this, a critical review of the literature pertaining to foreign exchange risk has been provided in the appendix at the end of this report. Management of Foreign Exchange Risk Having noted the fact that Euro Jet is faced with a risk of foreign exchange exposure due to fact that its revenues are earned under different currencies’ denominations, it is therefore pertinent to understand first that what is foreign exchange exposure risk and how it influences a company’s revenues. Moreover, the understanding of different risks and methods to manage them is likely to result in determining an approach which is more suited to the needs and requirements of Euro Jet. Foreign Exchange Exposure Risk The foreign exchange exposure risk refers to the expected gain or loss incurred due to fluctuations in the exchange rate (Arnold & Kumar, 2008; Moles et al., 2011). The foreign exchange risk resulting from fluctuations in the exchange rate may impact the overall cash flows, revenues, assets and liabilities and other items of financial statements of a company. In other words, the changes in foreign exchange rates result in the changes in a firm’s value, which may be favourable or an unfavourable change (Madura, 1989). Companies having operations in more than one country, like Euro Jet, are projected to risks associated with foreign exchange fluctuations. The risks associated with foreign exchange fluctuations may be categorised into three main types, which are as follows: Transaction Risks This risk relates to the risks associated with cash flows, i.e. the impact of changes in the exchange rates on revenues receivable, expenses payable, and other payments to be made to shareholders and third parties (Arnold & Kumar, 2008; Moles et al., 2011). Translation Risks This risk refers to the impact of change in foreign exchange rates on the value of a company. The impact of changes in foreign exchange rates is translated and reflected in the balance sheet of the company (Arnold & Kumar, 2008; Moles et al., 2011). Economic Risks This risk relates to the exchange rate fluctuations translated in the present value of operating cash flows to earned in future by a company. In other words, this risk relates to impact of changes in foreign exchange rates on the earnings of a company (Arnold & Kumar, 2008; Moles et al., 2011). Keeping in view this discussion of the foreign exchange risk and its various types, the approaches for managing foreign exchange exposure risk can be discussed as under. Approaches for Managing Foreign Exchange Exposure Risk In order to manage foreign exchange exposure risk, the most common and widely applied approach by both financial and non-financial business entities is the use of hedging. However, hedging has also various types and therefore various hedging approaches can be followed by business entities, and particularly by Euro Jet. Hedging refers to dealing with risk for a company resulting from exposure to ...Show more


Foreign Exchange Risk Management and Risks Related to Expansion and Growth- A Case Study of Euro Jet Foreign Exchange Risk Management and Risks Related to Expansion and Growth- A Case Study of Euro Jet Introduction Euro Jet’s operations are spread to different parts of the Europe and the airline is the largest European airline in terms of seat-miles flown per annum…
Author : cdouglas
The task is to review EuroJets foreign exchange exposure
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the coursework on your topic
"The task is to review EuroJet's foreign exchange exposure"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Exposure to Currency Risk: Definition and Measurement
Starting a new venture or moving to another country is not an easy task because the investor or the company not only has to face usual risk that a business faces but it has to deal with the exchange rate risk or translation risk (Gitman, 2003).
8 pages (2000 words) Coursework
A Task on Geotechnics
According to this method, at first we need to locate the point of intersection of the water level with the adjacent dam slope. It is point A on Figure 1. If point O shown on Figure 1 is chosen to be the coordinate origin, then x coordinate of point L is equal to , while its z coordinate is equal to zero.
10 pages (2500 words) Coursework
Determination of Exchange Rate
Exchange rates policy dates back many years. As noted by Lau (n.d., p. 2), in 1867, the Trans-Atlantic cable was the only electronic link between Europe and North America. In this period, four fuzzy edges characterized the international monetary experience.
16 pages (4000 words) Coursework
Why might firms with exposure to foreign markets use foreign currency derivatives
Forex Derivatives- A Tool to Minimise Corporate Risks Introduction As per Rawls and Smithson (1990), risk management is now employed by many multinational corporations to a large extent that outcomes of surveys showed that financial executives graded risk management as one of their foremost objectives.
4 pages (1000 words) Coursework
Efficiency of Foreign Exchange Market
One of the early theories of modern finance is the hypothesis of efficient markets. The efficient markets hypothesis tells that prices fully reflect information available to market participants. From the microstructure point of view, these participants are either hedgers or speculators.
10 pages (2500 words) Coursework
Hedge and Exchange Rate Effects
A number of industries in all nations display vital publicities (Bodnar & William 29). Additionally, the researchers state that for every stated nation, the exchange rate is vital for explaining commerce profits at the financial system-broad level. The Bodnar, Gordon and William have decided to explore whether the exchange rate publicities are methodically connected to the operations of the commerce involved.
8 pages (2000 words) Coursework
Task Analysis
The experiment shows that removing the 4 layers of plaque needs 6 physical brushing strokes (Annett, 2000).  The six techniques outlined in the steps need a total time of 120 seconds, which is equivalent
6 pages (1500 words) Coursework
Task 3 Experiment
My study aims at establishing performance of germinating maize seedlings by inducing similar conditions as the ones in saline regions and assessing the effect of hypocotyl and radicle growth under monitored laboratory conditions. The results that will be drawn from
5 pages (1250 words) Coursework
Learning Task
For this reason I would liberate the people to join churches so as to benefit from such privileges. As a church leader, I would intervene in legal disputes and help the people in the community solve
1 pages (250 words) Coursework
Exchange Rates
This practice makes specified quantity of current markets and currency options in improving profitability. Satkunas (2007), views that maximizing shareholder
1 pages (250 words) Coursework
Comments (0)
Click to create a comment
Let us find you another Coursework on topic The task is to review EuroJet's foreign exchange exposure for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
Join us:
Contact Us