Multinational financial management requires that the effects of changing currenc
ID: 2805477 • Letter: M
Question
Multinational financial management requires that
the effects of changing currency values be included in financial analyses.
legal and economic differences need not be considered in financial decisions because these differences are insignificant.
political risk should be excluded from multinational corporate financial analyses.
traditional U.S. and European financial models incorporating the existence of a competitive marketplace not be recast when analyzing projects in other parts of the world.
cultural differences need not be accounted for when considering firm goals and employee management.
A)the effects of changing currency values be included in financial analyses.
B)legal and economic differences need not be considered in financial decisions because these differences are insignificant.
C)political risk should be excluded from multinational corporate financial analyses.
D)traditional U.S. and European financial models incorporating the existence of a competitive marketplace not be recast when analyzing projects in other parts of the world.
E)cultural differences need not be accounted for when considering firm goals and employee management.
Explanation / Answer
For multinational operation the companies has to consider exchange rate risk along with cash flows.. So, Multinational financial management requires that the effects of changing currency values be included in financial analyses..
Various ways company can use protect itself from fluctuating exchange rates is mention below:
1. Use forward exchange rate
2. Use future contract
3. Use call or put option to hedge fluctuating exchange rates.
4. In some cases company can use SWAP contract also to hedge the currency fluctuation risk.
Option (A) is correct answer.
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