Economic Exposure
This report reviews the foreign exchange exposure of Eurojet due to the future development plans and growth of the low cost airline company, this report also highlights the various risks Eurojet, faces in operating in different countries identifying, measuring, and managing the various foreign exchange exposures that might be faced by Eurojet. However, some of these issues will be analysed differently.
Foreign Exchange Exposure:
According to Buckley (2004, pg.135) foreign exchange exposure means that a firm has assets, liabilities, and profits or expected future cash flow streams such that the home currency value assets, liabilities, profits or the present value in the home currency terms of expected future cash flows changes as exchange rate change.
ISSUE 1: foreign risk exposure management
Identifying Eurojet foreign exchange risk
For Eurojet the risks that might arise currently for being an international business is the concentration of Eurojet airlines with significant exposures in Euro areas (Dublin Dusseldorf, London-Stanstead, Milan, Brussels,) and North Africa, means that they need to be aware of this risks before they analyse, and agree on what to do about it.
Therefore, this exposure occurs due to their currency movements in operating centres, which may alter their home currency (Buckley, 2004, pg.143) giving rise to exchange rate fluctuations and risks. Therefore Eurojet exposure to exchange rate fluctuations will come in three forms: transaction exposure, economic exposure, and translation exposure. In addition, these different exposures will be analysed by applying to Eurojet.
Transaction exposure Transaction exposure occurs because; a payable or receivable is denominated in a foreign currency (Buckley, 2004). It is also a cash flow exposure including sale of an asset and the receipt of the payment. Within this time interval exchange rates might change, and will exposed Eurojet to a risk either positive or negative, which will have an impact
Foreign Exchange Exposure:
According to Buckley (2004, pg.135) foreign exchange exposure means that a firm has assets, liabilities, and profits or expected future cash flow streams such that the home currency value assets, liabilities, profits or the present value in the home currency terms of expected future cash flows changes as exchange rate change.
ISSUE 1: foreign risk exposure management
Identifying Eurojet foreign exchange risk
For Eurojet the risks that might arise currently for being an international business is the concentration of Eurojet airlines with significant exposures in Euro areas (Dublin Dusseldorf, London-Stanstead, Milan, Brussels,) and North Africa, means that they need to be aware of this risks before they analyse, and agree on what to do about it.
Therefore, this exposure occurs due to their currency movements in operating centres, which may alter their home currency (Buckley, 2004, pg.143) giving rise to exchange rate fluctuations and risks. Therefore Eurojet exposure to exchange rate fluctuations will come in three forms: transaction exposure, economic exposure, and translation exposure. In addition, these different exposures will be analysed by applying to Eurojet.
Transaction exposure Transaction exposure occurs because; a payable or receivable is denominated in a foreign currency (Buckley, 2004). It is also a cash flow exposure including sale of an asset and the receipt of the payment. Within this time interval exchange rates might change, and will exposed Eurojet to a risk either positive or negative, which will have an impact