Metron Electronics Corporation Mec
Executive Summary
We are discussing the case study of Merton Electronics Corporation (MEC). Although company is doing well as far as sales is concern but their net profit is dipping. This is due to increasingly difficult market conditions as well as fluctuation in international currency prices.
Patricia Merton is president and majority shareholder of MEC. MEC is exposed to three currencies Japanese Yen, US Dollar & Taiwanese Dollar. Major concern of MEC is volatility of Yen and Taiwanese Dollar. With over 60 percent of purchases are subjected to currency fluctuation, company is suffering from heavy monetary losses. We are discussing various hedging methods available in front of MEC to get a shield from exchange rate fluctuation.
1. Currency Risk Exposure
Currency risk is the type of risk that arises because of change in prices of one currency against other. Any company which have business or assets in different countries they are exposed to currency risk unless they hedged their position. Currency risk exists regardless of whether you are investing domestically or abroad. If you invest in your home country, and your home currency devalues, you have lost money. Any and all stock market investments are subject to currency risk, regardless of the nationality of the investor or the investment, and whether they are the same or different. The only way to avoid currency risk is to invest in commodities, which hold value independent of any monetary system.
Currency risk exposure is the dollar amount that is at risk if exchange rates move in an unfavorable direction. A company has currency exposure when the currencies for its expenditures and revenues are not the same. Future payments or distributions payable in foreign currency carries the risk that the foreign currency will depreciate in value before the foreign currency payment is received and converted into US dollars. Although there is a chance for profit, most businesses and
We are discussing the case study of Merton Electronics Corporation (MEC). Although company is doing well as far as sales is concern but their net profit is dipping. This is due to increasingly difficult market conditions as well as fluctuation in international currency prices.
Patricia Merton is president and majority shareholder of MEC. MEC is exposed to three currencies Japanese Yen, US Dollar & Taiwanese Dollar. Major concern of MEC is volatility of Yen and Taiwanese Dollar. With over 60 percent of purchases are subjected to currency fluctuation, company is suffering from heavy monetary losses. We are discussing various hedging methods available in front of MEC to get a shield from exchange rate fluctuation.
1. Currency Risk Exposure
Currency risk is the type of risk that arises because of change in prices of one currency against other. Any company which have business or assets in different countries they are exposed to currency risk unless they hedged their position. Currency risk exists regardless of whether you are investing domestically or abroad. If you invest in your home country, and your home currency devalues, you have lost money. Any and all stock market investments are subject to currency risk, regardless of the nationality of the investor or the investment, and whether they are the same or different. The only way to avoid currency risk is to invest in commodities, which hold value independent of any monetary system.
Currency risk exposure is the dollar amount that is at risk if exchange rates move in an unfavorable direction. A company has currency exposure when the currencies for its expenditures and revenues are not the same. Future payments or distributions payable in foreign currency carries the risk that the foreign currency will depreciate in value before the foreign currency payment is received and converted into US dollars. Although there is a chance for profit, most businesses and