Final Project (individual)
· Choose a multinational company in an industry that you believe foreign operations and foreign currency risk exposure play a significant role in the companies’ core business and their financial performance. Explain the rationale of your selection.
· What geographic areas other than their home country does the company conduct business? What percentage of sales revenue is generated from operations in these foreign markets respectively? How did the distribution change/evolve in the past 3-5 years?
· Pick three foreign markets that generates most sales revenues for the company, and present the fluctuation of the exchange rate in the past three years (with monthly data and graphs).
· Estimate the magnitude of impact of the exchange rate fluctuations on the company’s sales revenue in the past three years (show your calculation). See if you could find information in the company’s annual reports to confirm or adjust your estimate.
· How does the company manage foreign currency transaction (and translation) risk?
· Which method does the company use to translate foreign currency financial statements? How do you know? What are the translation adjustment amounts in the past three years?
· Compare your selected company to 3-5 of its industry peers, comment on the following:
· How does the weight, diversity and location of foreign operations compare to its peers? Why do you think the company made the decision to operate in the locales chosen?
· How does the company’s risk management strategy compare to its peers? What are the similarities and differences in managing their foreign currency exposure?
· Is the company’s translation method consistent with its industry peers? If not, did the company disclose the reason why it uses the method as chosen?
· Based on all above, provide your evaluation of the company’s risk management strategies and how effectively the strategies were executed as reflected in the financial results in the company’s past three years.
The written report should use the following format:
· A title page
· Table of Contents (1 page)
· Executive summary (1 page)
· Main body of the paper (5-8 pages)
· Tables and graphs, if any
· References
Use APA style with footnote. See “Citation Guideline”.
Single space, paper size 8.5″ x 11″, Times New Roman, 12 font, 1″ margins on all sides.
Failure to meet the above requirements will result in a minimum of 10% points deducted.
Here’s a structured approach to tackle the final project based on the requirements:
### Title Page
– **Title**: Risk Management and Foreign Currency Exposure of [Company Name]
– **Subtitle**: An Analysis of Foreign Operations and Financial Performance
– **Your Name**
– **Course Name/Number**
– **Date**
### Table of Contents
1. **Executive Summary**
2. **Introduction**
3. **Company Overview and Foreign Operations**
– Geographic Areas of Operation
– Sales Revenue Distribution
– Evolution in the Past 3-5 Years
4. **Foreign Currency Exposure**
– Exchange Rate Fluctuations
– Impact on Sales Revenue
– Risk Management Strategies
5. **Translation Methods and Financial Statement Adjustments**
– Currency Translation Methods
– Translation Adjustment Amounts
6. **Comparison with Industry Peers**
– Foreign Operations and Sales Revenue
– Risk Management Strategies
– Currency Translation Methods
7. **Evaluation and Conclusion**
– Effectiveness of Risk Management Strategies
– Reflection on Financial Results
8. **References**
9. **Appendices** (if any)
### Executive Summary (1 Page)
Provide a concise summary of the report, including the company’s foreign operations, the significance of foreign currency risk, and key findings from the analysis.
### Main Body of the Paper (5-8 Pages)
1. **Introduction**
– Introduce the multinational company chosen and explain the rationale behind your selection.
– Highlight the importance of foreign operations and foreign currency risk for the company.
2. **Company Overview and Foreign Operations**
– **Geographic Areas**: List the countries where the company operates outside its home country.
– **Sales Revenue Distribution**: Present the percentage of sales revenue generated from each foreign market.
– **Evolution**: Discuss how the distribution of sales revenue from foreign markets has changed in the past 3-5 years.
3. **Foreign Currency Exposure**
– **Exchange Rate Fluctuations**: Present monthly exchange rate data and graphs for the past three years for three major foreign markets.
– **Impact on Sales Revenue**: Estimate the effect of exchange rate fluctuations on the company’s sales revenue. Include calculations and check against the company’s annual reports.
– **Risk Management Strategies**: Explain how the company manages foreign currency transaction and translation risk.
4. **Translation Methods and Financial Statement Adjustments**
– **Currency Translation Methods**: Describe the method used by the company to translate foreign currency financial statements.
– **Translation Adjustments**: Provide translation adjustment amounts for the past three years.
5. **Comparison with Industry Peers**
– **Foreign Operations**: Compare the company’s foreign operations with 3-5 industry peers, including the weight, diversity, and location of foreign operations.
– **Risk Management Strategies**: Analyze and compare the risk management strategies used by the company and its peers.
– **Translation Methods**: Compare the translation methods used by the company and its industry peers. Explain any differences.
6. **Evaluation and Conclusion**
– **Effectiveness of Risk Management Strategies**: Evaluate how effectively the company’s risk management strategies were executed.
– **Financial Results**: Reflect on how these strategies impacted the company’s financial performance over the past three years.
### Tables and Graphs
– Include tables and graphs for exchange rate fluctuations, sales revenue distribution, and translation adjustments.
### References
– List all sources used, including the TED Talk video, company reports, and peer-reviewed journal articles, formatted in APA style.
### Appendices (if any)
– Include supplementary materials, such as detailed data tables or additional charts.
### Notes
– Ensure all sections are formatted according to APA style, with single spacing, 12-point Times New Roman font, and 1-inch margins.
– Include in-text citations and a reference list formatted in APA style.
This structure will help you present a comprehensive analysis of the chosen company’s foreign operations and currency risk management.
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