国际会计1008.doc

1.What are the different types of foreign exchange exposure faced by companies engaged in international business? Explain what causes each type of exposure. The types of foreign exchange exposure:(1)Translation exposure.(2)Transaction exposure.(3)Economic exposure.(1)Translation exposure:The potential for an increase or decrease in the parents net worth,and reported net income,caused by a fluctuation in the exchange rates since the date of the previous periods consolidated financial statements.(2)Transaction exposure:The potential fluctuation of exchange rates between the initiation of the transaction and the settlement of the invoice amount.Consists of:quotation exposure,backlog exposure and billing exposure.It measure gains or losses that arise from the settlement of existing financial claims and obligations that are set in a foreign currency.(3)Economic exposure:The extent to which the value of the firm would be affected by unexpected changes in currency exchange rates. ? ? 2. Assume the following average exchange rates for the year (U.S. dollar per British pound sterling):1. 1.65 3. 1.59Using each exchange rate, make a table converting a), b), c) and d) into U.S. dollars.?Determine which exchange rate produces the most favorable results in U.S. dollars. ? ? . ? British Pound Sterling(millions) 1.$1.71 2.$1.65 3.$1.69 4.$1.59 a)Net Sales 2056 3515.76 3392.4 3474.64 3269.04 b)Gross Profit 1203 2057.13 1984.95 2033.07 1912.77 c)Income Before Taxes 669 1143.99 1103.85 1130.61 1063.71 d)Net Income 481 822.51 793.65 812.89 764.79 2.$1.59 produces the most favorable results in U.S. dollars. ? ? 3.Gator Corporation (U.S.) purchased equipment worth 2 million German marks from Holdstet(Germany) at the beginning of the year. The transaction was denominated in German marks. The exchange rate at that time was US$0.65=1DM. However, due to a stronger economy, the German mark had stengthened against the U.S. dollar resulting in an exchange rate of US$0.70=1DM a