Accounting: International Finance and Forex (Coursework Sample)

International Finance and Forex
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Part A
Anyone who transacts or conducts business in more than one currency should be aware of their exposure to foreign exchange risk. The risk that a business takes on while transacting in foreign currencies is meant by the term "forex exposure." To properly manage risk while dealing with currencies from different countries, businesses must first recognize their risks. The risk associated with overseas transactions is referred to as transaction exposure. Exchange rates can alter after a corporation has already committed money (Madura, 2020). As a result of currency changes, many global businesses are particularly vulnerable to severe capital losses.
Is it worth trying to lessen the risk at this point in time? However, a corporation may view currency changes as a price to be paid for doing business and is prepared for the anticipated volatility in earnings. As a result of the company's high-profit margins, or its strong brand/competitive position, it may be able to boost prices to counteract currency fluctuations. Another possibility is that the corporation is conducting its business with one of the countries whose currency is officially tied to the US dollar. However, this scenario is rare because the trade volume between these countries is so small.