Essay on A Small Business Owner That Exports All Its Products

Essay on A Small Business Owner That Exports All Its Products

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A small business owner that exports all its products to Europe, and relies only on the Euro, must plan deliberately. Relying 100% on the Euro (EUR) may be difficult, especially during the exchange. Luckily, there are different methods available which could help prevent against a devastating loss. I found that investing in the currency market and hedging to be the best methods to prevent devastating losses. This morning, I researched Yahoo Finance to see what the exchange rates were for the past five years of the EUR to the United States Dollar (USD). In April 2011, the EUR was at its peak and the exchange rate between the EUR and USD was 1:1.4806. Today, November 2, 2015, the EUR is down to 1.10331. This means that the EUR is down .3773 over the past five years. This doesn’t seem like a lot of money, but the analysis showed continual loss over the past eighteen months, which would be damaging to personal finances. Fortunately, hedging is a method I found to be useful in preventing a catastrophe from occurring.
Dealing with one currency is difficult enough without the added risk of the ever changing exchange rates. "For those keeping an eye on the euro 's exchange rate, the Greek crisis is the biggest influencer of the single currency 's value, dwarfing other factors such as deflation," said Andy Reid at moneycorp.2 If this continues, the exchange rate could unexpectedly drop, resulting in lost money during the exchange. Although this type of dilemma can’t be prevented, there are options available to insure your money. Since the revenue is in EUR, the business owner must identify how much EUR is required to sustain themselves comfortably, yet remain in business. The business owner may want to purchase a “put optio...


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...tability: homogeneity of social fabric, government political regime, and foreign relationships.
Business environment: management of economy, foreign investment climate, and working conditions. The overall success of the operation depends on the relevance of the parameters and weighted assessments assigned to each category. The global rating can be adjusted according to whether the risk is associated with the export transaction, direct investment, or loan (Agarwal, 2009, p 97-98).









References
1. Yahoo Finance, EUR/USD (EURUSD=X), Retrieved November 2, 2015 from http://finance.yahoo.com/q?s=eurusd=X.

2. Phillips, L. (June, 2015). Greek crisis is the biggest influencer of the euro’s value. Telegraph.co.uk. Retrieved from http://www.telegraph.co.uk/finance/personalfinance/expat-money/11705978/Greek-crisis-is-the-biggest-influencer-of-the-euros-value.html.

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