Why Don't Firms Avoid Exchange Rate Risk by Purchasing a Supply

question 82

Essay

Why don't firms avoid exchange rate risk by purchasing a supply of foreign currency and simply holding it until it's needed?

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Definitions:

Markup

A term used in accounting and finance to describe the difference between the cost of a good or service and its selling price.

Activity At Capacity

The level of operations where a company or a production process is utilizing all available resources without any waste.

Fixed Manufacturing Overhead

Indirect manufacturing costs that do not change with the level of production, such as salaries of managers and depreciation of factory equipment.

Estimated Labor-Hours

A projection of the total hours of work required to complete a task or project.