Management of risk in foreign exchange


0
7 comments

Management of risk in foreign exchange:

Advertisement

A business enterprise may require imports and do exports also. Whenever this is done the invoice is in foreign currency. In imports the business enterprise requires foreign exchange while in exports it gets foreign exchange. There is a risk involved while doing imports or exports. The risk is that the exchange rate of the foreign currency in terms of Indian Rupees can keep changing. We will explain this through an example.

Example:

We have a US Dollar bill for 1000 receivable after a month. Presently the exchange rate is 1 US Dollar = Rs.48.25. By the time the money is received after a month, in case the rate is less than Rs. 48.25, we will lose money. On the contrary if the exchange rate is more than Rs. 48.25 we will gain. Exactly opposite will be the effect in the case of imports. The importer will pay less if the exchange rate decreases and more if the exchange rate increases. There are ways and means of minimising the risk of foreign exchange. Finance manager is expected to take care of such risks.

Advertisement
The following two tabs change content below.
We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to contact@bms.co.in.

Like it? Share with your friends!

0
7 comments
BMS Team

We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to contact@bms.co.in.

7 Comments

Ask Us On WhatsApp
Choose A Format
Personality quiz
Series of questions that intends to reveal something about the personality
Trivia quiz
Series of questions with right and wrong answers that intends to check knowledge
Poll
Voting to make decisions or determine opinions
Story
Formatted Text with Embeds and Visuals
List
The Classic Internet Listicles
Countdown
The Classic Internet Countdowns
Open List
Submit your own item and vote up for the best submission
Ranked List
Upvote or downvote to decide the best list item
Meme
Upload your own images to make custom memes
Video
Youtube, Vimeo or Vine Embeds
Audio
Soundcloud or Mixcloud Embeds
Image
Photo or GIF
Gif
GIF format