Macroeconomics of my own life Essay Example | Topics and Well Written Essays - 1000 words

Macroeconomics of my own life - Essay Example On a day-to-day basis, our firm refines crude oil into useable forms, be it diesel, petrol or gas among others. The global market exhibits a great need for these products and this need does not get fully satisfied at any particular time. As such, even when we produce in excess, there would always be market for the products. But an interesting phenomenon I observed was the fact that with increased need for our products in the market, the prices would go up. Such are the times when, say, we receive more than usual orders. Macroeconomics refers to this need as demand (Sexton 105). This observed phenomenon has been documented by Mankiw (69) who notes that with increase in demand, there would be a consequent increase in price, all other factors held constant as retrieved from the demand curve. Even though the demand curve dictates that there would a proportionate decrease in price with decrease in demand, our firm often takes time to decrease its prices with decrease in demand. And even t he minimal decrease in price would not be comparable to the price increase trend. This could be attributed to factors held constant when theorizing the demand curve as documented by Mankiw (69). In our company, these factors could be customer loyalty and the limited substitute options in the industry since our firm controls a significant portion of the oil market in its locality. Furthermore, the government has set guidelines that govern the pricing in the gas industry because of the important role that the industry plays in driving the economy. In macroeconomics, the government would be said to have interest in the aggregate supply which encompasses the economy’s productive capacity for goods and services (Sexton 167). To further illustrate the effect of demand on the prices of our products, the 2008 economic recession provides an appropriate example. During this time, a majority of the countries were facing hard economic times and could therefore not engage in meaningful pr oduction activities. Similarly, a majority of air travels for instance reduced as people sought for ways of cutting down on their expenses. This meant that the demand for our products should have declined during the same period. But on the contrary, the demand increased with other countries joining in the list of our existing customers. As such, the prices of our commodities kept rising to an all-time high before the government set up proper guidelines on pricing. Information acquired from macroeconomics argues against this trend for the good of the economy. The increase in prices of oil products slows down economic activities, which in turn reduces the final goods and services which the country produces for its market at any given time, referred to as gross domestic product, GDP by (Sexton 585). This would be determined by summing up the output from each enterprise to give a total. The GDP serves as a significant indicator of the living standards of a country. The government apprec iates this fact and would thus step in to contain any factors that threaten the economy such as excessive increase in the cost of production, say due to increase in the prices of oil products. Whereas there would be times when the firm receives plenty of supplies of crude oil, there would also be times of limited supply. With oil producing and exporting countries being prone to wars, war would be the leading reason for limited supplies from such countries. During such times of low

Hotel Chocolat's Stategic Choices Essay Example | Topics and Well Written Essays - 4000 words

Hotel Chocolat's Stategic Choices - Essay Example Since its existence, Hotel Chocolat has been operating as a privately run company with active involvement of the co-founders. Moreover, it is an example for those chocolate shops that are willing to enter the retail sector of the confectionary industry; Hotel Chocolat grew from an online store to a luxury retail store in the year 2004. The uniqueness of the brand’s offerings lies in its level of authenticity and originality that is evident in every bite of its manufactured chocolate (Hotel Chocolat, 2013a). Presently, Hotel Chocolat has about seventy stores in UK, five in the US and Middle East. Hotel Chocolat portfolio comprises of various attractive products and businesses that shed light on its aggressive expansion strategy. A cacao based cuisine street food cafe is present at Borough Market in London that offers the customers a wide range of delicious items such as sweet and savoury wraps of cacao, genuine cocoa tea along with huge choices of small chocolate batches. In Sa int Lucia, there is the Boucan Restaurant which is presenting the customers with a complete experience of dining. The ambience is quite appealing for the visitors which are complemented with a healthy and light menu from cacao cuisine (Hurley, 2010; MarketingWeek, 2011). Hotel Chocolat is the pioneer brand in offering the ‘Chocolate Bonds’ for the expansion of the UK economy. These bonds were offered to its members of Chocolate Tasting Club who helped in raising fund of four million pounds. One of the best creations by the organisation is ‘London – Roast + Conch’; it is a venue that has been developed for roasting the bean in small batches and provide the customers an opportunity to view the process of chocolate making in front of their eyes (Cuddeford-Jones, 2012). In order to successfully fulfil the desires of the chocolate lovers, Hotel Chocolat has been offering the most diverse range of products and each one of them has a wide variety for select ion so that everyone can buy the chocolate and enjoy it to the utmost satisfaction level. Broadly, the products are categorised in six divisions such as Sleekster Selection, The Purist, Giant slabs, Selectors, Liquid Chocolat, Cocoa Juvenate Beauty, Luxury Box Chocolates and Small Little Things (Hotel Chocolat, 2013b). According to Taylor (2013), Hotel Chocolat reported a complete year profit-before-tax (PBT) of 84% which is about 5.4 million pounds. At the end of June 2012, the group sales accounted for 63.8 million pounds and EBITDA rose to 7.8 million pounds which was a rise by 41% when compared on year-on-year basis. UK Chocolate Industry Analysis In order to evaluate the strategic options that are available for a company in its industry, it is imperative for the concerned personnel to carry out its external and internal analysis (Day & Moorman, 2010). The external analysis reveals the macro-environmental factors that can impact the business performance in the long-run. Although an analysis of the competitors is mandatory but political, economic, social and legal situations can drastically impact the business operations (Brodie, 2009). Hotel Chocolat strategic analysis can be completed only when the macro-environmental factors are analysed extensively to properly identify the likely obstacles that can be encountered by it. According to KeyNote

Determining Operating Systems Essay Example for Free

Determining Operating Systems Essay This paper will describe how Barnes Noble (BN) uses an operating system and software applications to help the company reach its objectives (see appendix A). This paper will also describe the functions of computer hardware components used in the organization and how they aid BN in achieving its goals. Barnes Noble’s objective is to be the â€Å"World’s Largest Bookstore,† and it is. BN’s operating systems and software applications have also helped Barnes Noble â€Å"offer the largest in-stock selection of in-print book titles with access to approximately one million titles for immediate delivery† (Barnes Noble, Inc. , 2012). In addition, Barnes Noble has the world’s largest eBookstore which has partnered with Microsoft to offer a wide selection of college textbooks. Almost every organization or business benefits from a reliable database. â€Å"Databases are a comprehensive collection of related data organized for convenient access generally in a computer† (Dictionary.com, 2014). Until 2004, Barnes Noble used an Oracle operating system. The Oracle System database was able to hold all of the inventory statistics BN needed, but the information was difficult to input and extract. In order to access sales data and inventory, the stores had to suspend all business operations and shut down once a week for four hours. Information Technology professionals or programmers were required to produce reports, which created additional and unnecessary personnel costs. Barnes Noble needed a new database system to store and keep track of essential data; and, a new database management system to make the data useful. In 2005, Barnes Noble participated in a joint project with Microsoft to create a new data warehouse. They used the Microsoft Windows Server 2003 Enterprise Edition operating system to run the  Microsoft SQL Server 2000. Barnes Noble’s databases include customer information, such as book genre likes/dislikes, purchase history, and personal information, such as methods of payment and contact information. Another function of BN’s database is to maintain inventory statistics, a record of best-selling books, prices, and order information. A third aspect of BN’s database is to record employee and payroll data like, salary per hour, hours worked, sick days/vacation, and overtime. Databases are imperative for the success of Barnes Noble, but the raw data in the databases is not very useful on its own. Therefore, BN uses a database management system (DBMS). â€Å"A DBMS is a program used to create, process, and administer a database† (Kroenke, 2013, p. 113). Barnes Noble needed a DBMS that could easily create reports, so executives had fast access to sales st atistics, inventory, and membership information. They could then use this readily available information to target customer demographics or promote seasonal sales events. Due to its participation with Microsoft, Barnes Noble uses a DBMS called, â€Å"Microsoft SQL Server 2005 Integration Services† (Microsoft, 2005). â€Å"Structured Query Language (SQL) is an international standard language for processing a database† (Kroenke, 2013, p. 114) that all of the most common DBMS’s use. Microsoft’s SQL Server enables BN to manage critical information and run applications that may be too complex for other programs. SQL Server also provides tools, features, and functionality to construct classic and innovative extraction, transformation, and loading (ETL) applications that are used to relay millions of rows of data. This DBMS includes database administration that can be used to set up a security system involving user accounts, passwords, permissions, and limits for processing the database. Online Analytical Processing Cubes (OLAP) is one of the database applications that Barnes Noble can use. The program is simple enough for most people to learn, and it is a relatively easy means of creating reports and viewing data based on varying criteria without having to hire programmers for help. Another database application is ‘Litespeed’ by Quest Software. Barnes Noble uses Litespeed for the backup and recovery of data, which is something every database needs. Although Microsoft’s SQL Server is costly and can have limited compatibility, almost anyone in the company can learn how to use it. There are also security enhancements, embedded reporting and data analysis tools that allow BN to gain greater  insight from its business information and achieve faster results for a competitive advantage. In conjunction with its need of databases, Barnes Noble extensively uses hardware components for data input, output, and storage. Input hardware is any device used to supply information into a computer such as a keyboard, mouse, barcode scanner, or display. â€Å"Barnes Noble, Inc. is a bookselling company. The company is a content, commerce and technology company that provides customers access to books, magazines, newspapers and other content across its multi-channel distribution platform† (Barnes Noble, Inc., 2012). Barnes Noble operates more than 1,350 bookstores across the entire United States, and close to 700 bookstores on college campuses. Input devices at each location allow employees to enter customer information into an individual terminal that is then sent to a central server for storage. â€Å"Hardware for the project was a 64-bit HP Integrity Superdome Server equipped with 20 1.6-gigahertz Intel Itanium 2 processors and 84 gigabytes of RAM† (Microsoft, 2005). â€Å"Output hardware is an electronic or electromechanical equipment connected to a computer and used to transfer data out of the computer in the form of text, images, sounds, or other media† (Dictionary.com, 2014). One example of output hardware used at Barnes Noble is a printer for producing r eports. Executives at the company often need â€Å"Current sales data as well as historical information, which could be used to understand trends, such as in seasonal or regional sales. That kind of information could be used to shape promotions and marketing campaigns† (Microsoft, 2005). Another important output device from Barnes Noble is an eReader, named ‘Nook,’ that allows customers to purchase and download publications from BN’s library via WiFi. BN’s eCommerce division offers The Nook in several models and with varying features, but was primarily designed to give customers an alternative to traditional forms of written media. Customers can choose from millions of digital books, periodicals, movies, and music. The Nook is also environmentally friendly because it saves space and reduces paper waste. In addition, Barnes Noble’s eReader offers a backlit display that claims to have â€Å"resolved the number-one problem couples have in bed – having their sleep interrupted, or being prevented from falling asleep, when their partner reads with the light on† (Barnes Noble, Inc., 2012). In conclusion, this paper described how Barnes Noble uses the Microsoft  Windows Server 2003 Enterprise Edition operating system to run the Microsoft SQL Server 2000. The HP Integrity Superdome Server is a more effective and efficient mode of storage, and information from databases is easier to access. Now, â€Å"Because of the rapid extraction and loading of sales and inventory data, company employees and managers no longer have to wait to get information that can help them make business decisions† (Microsoft, 2005). The database administration security system also effectively uses account controls to allow customers access to the database of digital publications, which has greatly increased Barnes Noble’s eCommerce division. References Barnes Noble, Inc. (2012). Barnes Noble Booksellers. Retrieved on June 16, 2014 from the World Wide Web. www.barnesandnobleinc.com Dictionary.com, LLC (2014). Dictionary. Retrieved on June 16, 2014 from the World Wide Web. www.dictionary.reference.com Kroenke, D. (2013). MIS Essentials 3rd ed. Upper Saddle River, NJ: Prentice Hall Microsoft Case Studies (November 11, 2005). Bookseller gains business insights across sales channels with new data warehouse. Retrieved on June 16, 2014 from the World Wide Web. www.microsoft.com/casestudies Microsoft Corporation. (2005, October). Microsoft SQL Server 2005 Customer Solution Case Study. Retrieved from http://download.microsoft.com//barnes_noble.pdf.

Foreign Exchange Risk Management Analysis

Foreign Exchange Risk Management Analysis Chapter 1 Introduction This chapter will introduce the reader to the subject at hand and why the chosen research area is of interest and relevance for further development. Finally, the chapter includes a problem discussion, which in turn ends up in the research purpose of the thesis. 1.1 Background of the Study The deepening of globalization process has led to an increase in foreign exchange transactions in international financial markets. This has determined a higher volatility of exchange rates, and, implicitly, an increased foreign exchange risk. There are many types of risks, but only few of them can bring losses as large as foreign exchange risk. In these conditions, the development of new modern and effective methods for managing foreign exchange risk becomes a great necessity for the players in international financial activity. Foreign exchange risk management is crucial for companies frequently trading in the international market. Empirical research shows that profits of multinational companies are affected by volatile floating foreign exchange rates. Nevertheless, small firms trading exclusively on their domestic markets also become increasingly exposed to foreign currency fluctuations. Actually, small firms depend on the volatility of the main currencies because many of them out-source their production to foreign countries. This means that they incur costs in a foreign currency (wages, taxes, material, etc.) and they also need to manage this exposure. Other small firms are exposed indirectly given that their strategic position can be affected by volatile FX rates. By definition, all entrepreneurial activities incur risks, and coping with risk has therefore always been an important managerial function. In recent years, however, risk management has received increasing attention in both corporate practice and the literature. This is particularly true for the management of financial risks, i.e. the management of foreign exchange risk, interest rate risk and other financial market risks. A major reason for this is the development of markets for derivative financial instruments. Forward contracts, futures, options, swaps and other, more complex financial instruments today allow firms to transfer risks to other economic agents who are better able, or more willing, to bear them. In 1971, the Bretton Woods system of administering fixed foreign exchange rates was abolished in favour of market-determination of foreign exchange rates; a regime of fluctuating exchange rates was introduced. Besides market-determined fluctuations, there was a lot of volatility in other markets around the world owing to increased inflation and the oil shock. Corporates struggled to cope with the uncertainty in profits, cash flows and future costs. It was then that financial derivatives foreign currency, interest rate, and commodity derivatives emerged as means of managing risks facing corporations. The interest in the potential vulnerability of multinational firms to foreign exchange rate risk is heightened by the wide currency fluctuations experienced during the last few decades and this issue has engendered a considerable amount of research (Muller, A., Verschoor, W.F.C. 2006). In India, exchange rates were deregulated and were allowed to be determined by markets in 1993. The economic liberalization of the early nineties facilitated the introduction of derivatives based on interest rates and foreign exchange. However derivative use is still a highly regulated area due to the partial convertibility of the rupee. Currently forwards, swaps and options are available in India and the use of foreign currency derivatives is permitted for hedging purposes only (Giddy et.al. 1992). 1.2 Problem Statement Transaction exposure to foreign exchange risk results from the effect of (unanticipated) changes in the spot exchange rate on the base currency value of foreign currency cash flows (contractual payables and receivables). Financial hedging of transaction exposure is implemented by taking an opposite position (to the spot position) on a currency derivate (such as forwards, futures and options) or by using money market hedging. In some cases, however, financial hedging may not be possible or it may be too expensive. For example, forwards, futures, and options may not be available for some currencies or for long maturities, and it may not be possible to obtain credit lines in certain currencies (which precludes money market hedging). This observation is particularly valid for countries where financial markets are rudimentary. If a firm facing (transaction) exposure to foreign exchange risk cannot indulge in financial hedging, it may resort to the operational hedging techniques of risk sharing and currency collars, which can be implemented by using customised hedge contracts embedded in the underlying trade contracts. Under a risk sharing arrangement, the benefits accruing to one party of a transaction as a result of a favourable change in the exchange rate (which is necessarily an unfavourable change for the other party) are shared by the two parties. A currency collar, on the other hand, is used to set a minimum value for the base currency value of cash flows at the expense of setting a maximum value. Thus, it involves a trade-off between potential loss and potential gain. The unpredictability of forex market may erode or even eliminate the profit margin built into an international sale at the time the sale was carried out, when selling on terms of weeks and even months. Foreign exchange rate keeps on fluctuating and they depend upon the market forces of demand and supply (Platt, G. 2007). Hedging refers to managing risk to an extent that makes it bearable. In international trade and dealings foreign exchange play an important role. Fluctuations in the foreign exchange rate can have significant impact on business decisions and outcomes. Many international trade and business dealings are shelved or become unworthy due to significant exchange rate risk embedded in them. Historically, the foremost instrument used for exchange rate risk management is the forward contract. Forward contracts are customized agreements between two parties to fix the exchange rate for a future transaction. This simple arrangement would easily eliminate exchange rate risk, but it has some shortcomings, particularly getting a counter party who would agree to fix the future rate for the amount and time period in question may not be easy. In India many businesses are not even aware that some banks do provide forward rate arrangements as a service to their customers. By entering into a forward rate agreement with a bank, the businessman simply transfers the risk to the bank, which will now have to bear this risk. Of course the bank in turn may have to do some kind of arrangement to manage this risk. Forward contracts are somewhat less familiar, probably because there exists no formal trading facilities, building or even regulating body. 1.3 Research Objectives and Questions There is a need to identify, quantify, and evaluate a firms risk exposure and to choose appropriate procurement strategies. The general objective of this study is to incorporate procurement and marketing decisions into a single hedging model, considering risk factors typically faced by firms in the textiles and garment industry. There are several reasons to explain why foreign risk management has gained in popularity over the last decades. The most important reason lies in the increased volatility of exchange rates, interest rates, and commodity prices, causing firms cash flows to become more uncertain. Secondly, firms tend to focus more on their core business, which makes them less diversified. As a consequence, the volatility of firms cash flows may increase. A third reason for the growing importance of foreign risk management can be found in the globalization of business activities, in which competition has increased and profit margins have declined. A final explanation we offer is the growing number of opportunities to manage risks. Based on the problem discussion our research objectives are formulated as follows: To review and critically analyse the practices adopt by the Indian exporters to hedge the forex risk. To evaluate the impact of foreign exchange risk on exporters and exports of a country like India To critically compile the issues faced by the Indian exporters in hedging foreign exchange risk. Based on the above stated research objectives the following research questions have been developed: RQ 1: How the export company determines foreign exchange risk? RQ 2: Which level the company can actively manage foreign exchange risk? RQ 3: How it can hedge the forex risk? RQ 4: What techniques are preferred by company in its forex risk management? 1.4 Relevance of Research Currently there is a scarcity of research papers about currency exposure management in companies in emerging markets. Theoretical studies like that of Copeland and Copeland (1999) are usually supported by the findings from developed countries (the USA, Canada, the UK). Therefore, the application of such studies might be complicated in developing markets. Researchers that analyze the foreign exposure management in companies often use large samples and questionnaires to evaluate the derivate use, and are successful in describing countries with well-developed markets. For emerging markets like India such quantitative approaches are extremely rare. Most often the situation with currency exposure management and application of derivatives by non-financial institutions is reflected in the newspapers. Yet, these articles are not academic papers and serve only as descriptions of the situation. Therefore, this study will be distinctive in several areas. First, it concentrates on India and will contribute to the increase in the number of academic studies about emerging markets. Second, it will contribute to the business community , as it will analyze the application of derivatives by exporting companies for hedging currency exposure and reveal the causes higher or lower popularity of derivatives. Third, it will apply the theoretical model which was developed based on the practice in developed countries, and test if the results from model application match the empirical findings in reality in India. 1.5 Outline of the Study This dissertation consists of five chapters (see Figure 1.1). In chapter one, a relative broad description is given in the beginning, providing the reader with a background and discussion of issues related to the problem area. This discussion lands in a specific research problem, which has been broken down into research questions. Chapter two gives a presentation of theories relevant for the research problem. Continuously, a description and justification of the methodological approaches chosen in this thesis is given in Chapter three. In chapter four the received empirical data is presented and contains an analysis of the collected data against the theory. Finally, conclusions and implications are presented in chapter five. Literature Review This chapter reviews the literature theory of foreign exchange risk management include the concepts of foreign exchange risks, its characteristics by different types, and hedge theory of foreign exchange risks. 2.1 Foreign exchange risk Whenever a company is running overseas business, the company is exposed to different categories of risk including commercial risk, financial risk, country risk and foreign exchange risk (Oxelheim 1984). Country Risk Foreign Exchange Risk Financial Risk Commercial Risk Figure2.1 The company risk Source: Oxelheim 1984, p14 Foreign exchange risk is commonly defined as the additional variability experienced by a multinational corporation in its worldwide consolidated earnings that results from unexpected currency fluctuations. It is generally understood that this considerable earnings variability can be eliminated-partially or fully-at a cost, the cost of Foreign Exchange Risk Management. (Jacques, 1981). According to Shapiro (2006), foreign exchange rate exposure can be defined as a measure of the potential changes in a firms profitability, net cash flow and market value because of a change in exchange rates. 2.2 The existing classifications of foreign exchange risks In the recent literature of foreign exchange exposure management, the types of exposures are usually summarized and simplified into three categories, translation, transaction, and economic ( Cowdell, 1993; Girnblatt and Titamn, 1998; Eitman et. al.,1998 and Shapiro, 2006). It is conventionally stated that the exposure to currency risk is categorized into three factors; seen below in figure 2.2. Figure 2.2 Types of currency risk exposure Source: Eun et al.,2007 Transaction Exposure The transaction exposure concept concentrates on contractual commitments which involve the actual conversion of currencies. A firms transaction exposure thus consists of its foreign currency accounts receivables and payables, its longer-term foreign currency investments and debt, as well as those of its foreign currency cash positions which are to be exchanged into other currencies. Until these positions are settled, their home currency value may be impaired by unfavorable parity changes. There exist four possibilities by which transaction exposure may arise (Eiteman 2007): When prices are stated in foreign currencies and the firm decides to purchase or sell goods or services. When borrowing or lending funds while contractual agreements on repayment are to be make in a foreign currency. When becoming a party to an unimplemented foreign exchange forward contract. When incurring liabilities or acquiring assets which are denominated in foreign currencies. The total transaction exposure consists of quotation exposure, backlog exposure and billing exposure, see figure 2.3: Figure 2.3 The life span of a transaction exposure Source: Eiteman et al., 2007 2.2.2 Economic Exposure The economic exposure, also called the operating exposure, measures any change in the present value of a company resulting from changes in future operating cash flows caused by unexpected changes in currency exchange rates. The analysis of economic exposure assesses the result of changing exchange rates on a companys own operations over coming months and years and on its competitive position in comparison with other companies. By measuring the effects on future cash flows related to economic exposure, the goal is to identify strategic moves or operating techniques that a company might wish to adopt in order to enhance its value in the face of unexpected exchange rate changes (Eiteman et al., 2007). Loderer and Pichler (2002) assert that firms often manage economic exposure by lending and borrowing in foreign currencies. He cites the following reasons for not hedging economic exposure: firms are unable to measure the size and the currency of future expected cash flows with much confidence, firms already hedge transaction exposure, firms consider that in the long term currency fluctuations offset each others. Surprisingly, the cost of hedging economic exposure is not an obstacle. 2.2.3 Translation exposure By consolidating its financial statements, a parent company with foreign operations must translate the assets and liabilities of its foreign subsidiaries, which are stated in a foreign currency, into the reporting currency of the parent firm. Basically, foreign subsidiaries must restate their local currency into the main reporting currency so the foreign values can be added to the parents reporting currency denominated balance sheet and income statement. The translation is usually used for measuring a subsidiarys performance(McInnes, 1971), providing accurate information for decision makers and investors (Ross, 1992; Bartov, 1995), and for both internal and external users (Sercu and Uppal, 1995). The common reason for translation from a foreign currency into the home currency is to meet the requirements of accounting regulations of home countries. External Hedging Methods As it is shown, the exposure to currency risk may involve current business transactions, future business transactions as well as financial statement translations. However, as there are factors or risk, so are there strategies for dealing with them. For companies, there are a number of external methods to use for the management of currency risk, namely the use of financial derivatives. The name derivative arises from the fact that the value of these instruments is derived from an underlying asset like a stock or a currency. By using these instruments it is possible to reduce the risks associated with the management of corporate cash flow, a method known as hedging. Financial market hedging instruments include (Butler, 2004): Fig 2.4: External Hedging Techniques 2.3.1 Foreign Exchange Forwards A foreign exchange forward is an agreement to buy or sell one currency at a certain future date for a certain price with a specific amount. It is the most common instrument used to hedge currency risk. The predetermined exchange rate is the forward exchange rate. The amount of the transaction, the transaction date, and the exchange rate are all determined in advance where the exchange rate is fixed on the day of the contract but the actual exchange takes place on a pre-determined date in the future. In major currencies, forward contracts can be available daily with maturities of up to 30, 90 or 180 days (Bodie Marcus 2008). A survey by Belk and Glaum (1990) indicates that the most common method used to hedge exchange rate risk is the forward contract. An empirical study of Pramborg (2002), also demonstrates that firms can be fully hedged with forward contracts. 2.3.2 Currency Futures In principle, a futures contract can be arranged for any product or commodity, including financial instruments and currencies. A currency futures contract is a commitment to deliver a specific amount of a specified currency at a specified date for an agreed price incorporated in the contract. The futures perform a similar function to a forward contract, but it has some major differences. Fig 2.5 Currency Futures The specific characteristics of currency futures include (Pike et.al., 1992): They are marketable instruments traded on organized futures markets. Futures can be completed (liquidated) before the contracted date, whereas a forward contract has to run to maturity. They are relatively inflexible, being available for only a limited range of currencies and for standardized maturity dates. The dealings occur in standard lot sizes, or contracts. They require a down-payment of margin of about 5 percent of the contract value, whereas forward contracts involve a single payment at maturity. Futures are usually cheaper than forwards contracts, requiring a small commission payment rather than a buy / sell spread. Table 2.1 provides a clearer summary of the major differences between forward and futures contracts. Table 2.1: Major Differences between Forward and Futures Contracts Forward Contracts Futures Contracts Customized contracts in terms of size and delivery dates Standardized contracts in terms of size and delivery dates Private contracts between two parties Standardized contracts between a customer and a clearing house Difficult to reverse a contract Contract may be freely traded on the market Profit and loss on a position is realized only on the delivery date All contracts are marked to market- the profit and loss are realized immediately. No explicit collateral, but standard bank relationship necessary Collateral (margins) must be maintained to reflect price movements Delivery or final cash settlement usually takes place. Contract is usually closed out prior to Maturity Source: Hull (2006), Moffett et al (2006) and Solnik and McLeavey (2004). 2.3.3 Currency options A foreign exchange option which is different from currency forward contracts and currency futures is to give the holder of the contract the right to buy or sell a certain amount of a certain currency at a predetermined price (also called strike or exercise price) until or on a specified date, but he is not obliged to do so. The seller of a currency option has obligation to perform the contract. The right to buy is a call; the right to sell, a put. There is option premium needed to pay by those who obtain such a right. The holder of a call option can benefit from a price increases (profit is the difference between the market price and the strike price plus the premium), while can choose not to excise when the price decreases (locked in loss of the option premium). Vice versa is for the holder of a put option. For the advantages of simplicity, flexibility, lower cost than the forward, and the predicted maximum losswhich is the premium, the currency option has become increasing popular as a hedging devise to protect firms against the exchange movements. Whenever there is uncertainty in the size of cash flows and the timing of cash flows, currency option contracts would be superior to traditional hedging instruments such as forward contracts and futures contracts. Grant and Marshall (1997) examined the extent of derivative use and the reasons for their use by carried out surveys in 250 large UK companies, found that a widespread use of both forwards and options(respectively 96% and 59%). The pointed that comparing to the primary reasons for the use of forwards were company policy, commercial reasons and risk aversion, a good understanding of instrument, and price were prominent while the primary reasons to use option for company management. 2.3.4 Currency Swaps Currency swaps are a hedging instrument for which two parties agree to swap a debt denominated in one currency for that in another currency. For example, an agreement between two firms to swap their debts of which one is denominated in Euro and that in US dollar (Leger and Fortin, 1994). In order to explain the use of currency of swaps, a Japanese firm that has exports to Australia is given as an example. The Japanese firm wants to protect its Australian-dollar receivables by using currency swap to match inflows in one currency with outflows in a foreign currency (natural hedging). Assuming the Japanese firm is not well recognized in the US financial markets, it may obtain funds from a domestic bank to swap with another firm that has dollar-denominated debt. This process is carried out by the swap dealers (usually banks) as an intermediary. The common objective of this type of transaction is that firms want to alter various future currency cash flows in its schedules into a particular currency for which its future revenues will be generated (Eiteman et.al 1998). The preference of particular currency is caused by several factors, such as, capital market segmentation, differences in regulation governing investment by institutional investors and asymmetry in the tax treatment of interest income and capital gains/losses (Jacque 1996). Although there are other types of swaps involving foreign currencies, such as, foreign currency forward swaps, plain vanilla, and a three-way back-to-back currency swap, they are designated primarily for hedging interest rate exposure. 2.4 Internal hedging methods For the reason that external hedging techniques with derivatives to manage foreign exchange exposure are often costly, many multinational firms would rather turn to consider using internal hedging devices such as Michael (2006): Currency matching, which involves pairing suitably a multinational firms foreign currency inflows and outflows with respect to amount and timing Currency netting, which involves the consolidated settlement of receivables, payables and debt among the subsidiaries of a multinational firm Invoicing in domestic currency, which reduces transaction risk primarily related to exports and imports. 2.5 Fundamental Philosophy behind Hedging We have presented that authors embrace hedging as insurance, and hedging as a value-enhancing tool. We believe the common view of hedging can be summarized as follows: Hedging is one of the three most fundamental reasons for the existence of the financial market, alongside speculative and arbitrage activities (JÃ ¼ttner, 2000). The hedging industry is evolving just like the rest of the business world. In fact, there is no definite set of tools or technique that can define hedging. As the world changes, new hedging mechanisms are derived; and as time passes, these mechanisms are refined and evolve into something new that can be better applied to the contemporary commercial marketplace (Batten et al, 1993; Faff and Chan, 1998; Alster, 2003;). Hedging is not a way of making money, but to assist management in better managing corporate revenue through reducing the corporate exposure to volatility in the foreign currency markets (Nguyen and Faff, 2002, 2003a; Anac and Gozen, 2003; Alster, 2003; De Roon et al., 2003; and Dinwoodie and Morris 2003). When used prudently, hedging can be effective insurance as well as a value-enhancing exercise for corporations. Effective hedging programs have been proven to allow corporations to minimize or transfer their foreign currency exposure. The diminished exposure to foreign currency fluctuations allows more stable and predictable cash-flows, notably in terms of revenue. As a result, firms are then capable of making more comprehensive financial plans, including more reliable estimations on tax, income after tax and dividends payable to shareholders. It is believed that a dividend payout is often of significant appeal to long-term, current or prospective shareholders (Nguyen and Faff, 2002, 2003b; Alster, 2003; Anac and Gozen, 2003; De Roon et al., 2003; and Dinwoodie and Morris, 2003). The three main questions surrounding hedging: when, what and how to hedge are shown in Figure 2.2 below as a decision tree. How to Hedge? Hedge Ratio 10% 50% 100% OR Any Ratio between 0.1%-99.9% What to Hedge? When to Hedge? Financial Tools Forward Futures Options Swap Hedge Under Currency Risk Exposure Non-Financial Tools Leading Lagging Fully participating market movements No Hedge Fig 2.7 Generic Hedging Decision Tree The question to hedge or not to hedge is a complex and controversial one in financial risk management. Natural hedges carry no explicit out of pocket cost and intrinsically form a better offset to economic exposures and so generally are preferred to synthetic hedges. Synthetic hedging can be likened to insurance, where the company incurs an explicit cost to reduce the risk or volatility inherent in its business results. The cost must be weighed against the risk-reducing benefits of the transactions, taking into account their precision and effectiveness. The real drivers of any hedging decision are 1) what is the risk tolerance of the company; and 2) what cost is acceptable for entering into transactions to reduce or eliminate the risk. Foreign currency-denominated activities engaged by Indian Exporters Expected payments of foreign exchange from trade Expected receipts of foreign exchange from trade Liabilities Assets Debt Debt Equity Net trade foreign exchange exposure (before derivates) Net balance sheet foreign exchange exposure (before derivatives) Foreign exchange Derivatives Net foreign exchange exposure (after derivatives) Fig 2.8: Decision to Hedge Foreign Currency Exposures Some managers feel strongly that hedging either should always be done or never done, and their approaches vary tremendously. Indeed, there is an academic perspective that hedging is never appropriate since risks like FX exposure represent diversifiable risks from the shareholder perspective, and thus, the cost is wasted effort for shareholders. Some managers share this view, but most multinational businesses of significant size engage in some financial hedging transactions. Major arguments for and against hedging are displayed in Table 2.2 Table 2.2: Theoretical Arguments on Hedging For Against Managing earnings volatility for FX risk can reduce a firms potential cost of financial distress. PPP and CIP imply compensating levels of FX rates and prices. Firms in financial distress face higher contracting costs with customers, suppliers, and employees. FX rates even out over time. Firms that hedge and reduce their earnings volatility pay less taxes over the long run if tax rates increase the income levels. With transactions costs, hedging is a losing bet on average. Managing FX risk and smoothing earnings volatility has a positive effect on stock price and shareholder value. Shareholders can diversify their own portfolios to compensate for FX risk.

An Inspector Calls - Write fully about one of the characters in the play. :: English Literature:

An Inspector Calls - Write fully about one of the characters in the play. Write fully about one of the characters in the play. Take into account what they have done before the play begins as well as their actions, words and attitudes during the course of the play. Write about the way attitudes, moods and opinions change and develop during the course of the action on the stage. An Inspector Calls is a play with many social and political messages. J. B. Priestley believed a great deal in socialism and he used several of his plays to try and influence people to his way of thinking. It was written in a time when Britain was ruled by a Labour government and socialist policies were seen as the way forward. It was a popular way of thinking at that time so Priestley's aim for the play was probably to teach the unconvinced. The play is set in the house of the Birling family. As soon as the curtains open, it is clear that the family is wealthy because there is high quality furniture and decoration in the house in which the play is set. The family use their house as a status symbol and have decorated it in a way so as to reflect their wealth. We learn this from the "few imposing but tasteless pictures" which will probably have been chosen because they were expensive, not because they were liked. These pictures also tell us that the Birlings are proud of their wealth and think themselves to be very important but lack the good taste which is present in those who are socially superior to them. The house is described as being "substantial and comfortable and old-fashioned, but not cosy and homelike." This setting suggests that the family are uncomfortable with each other and therefore suggests problems. We gather from the Birling family they are of an upper-middle social class, who think themselves to be of a very high status. Eric Birling the character I am going to focus on does not seem to be understood by the rest of the characters. His sister Sheila and he are still treated as if they were still children "What an expression, Sheila! Really the things you girls pick up these days!" Mr and Mrs Birling have a lack of understanding of the younger generation, particularly their offspring. They try to control their lives as this was the norm with generations prior to theirs, "Just let me finish, Eric. You've a lot to learn yet." Here we can see that the elders in the family have the first and last say in many matters.

DNA Report :: Biology

Many people have heard about this mysterious DNA molecule but don’t know much about it (what it is, where it’s located, what it does, etc.) In this report it will state the basics and investigate this mysterious molecule: deoxyribonucleic acid. DNA is a thin chainlike molecule found in almost every cell (Rubenstein, 2006), and is used in developing and functioning all known living organisms (â€Å"Wikipedia†, 2009). DNA is a Hereditary Material in a human body, (â€Å"U.S. National†, 2009), genomes determine hereditary (Rubenstein, 2006). The main goal for DNA is long-term storing of information (â€Å"Wikipedia†, 2009). Basically DNA is biological information exchanged from adult to child through reproduction (â€Å"National Human†, 2008). DNA is formed in the nucleus of a cell (â€Å"National Human†, 2008). Most DNA is found in the nucleus and a small amount is found in the Mitochondria. When DNA is found in the nucleus it is considered to be Nuclear DNA and when DNA is found in the Mitochondria it is considered Mitochondrial DNA (â€Å"U.S. National†, 2009). Humans always get 50% of DNA from your mom and 50% of DNA from your dad through reproduction; although only Mitochondrial DNA is from your mom because during fertilization egg cells only keep Mitochondria (â€Å"National Human† 2008). Sometimes DNA can be found in bacterial cells and in viruses (Rubenstein, 2006). DNA is made of many different resources found in a human body; chemicals, bases, and more. Deoxyribonucleic acid is made of three basic chemical building blocks; a Phosphate group, a Sugar group, and 1 of 4 nitrogen bases. DNA is made of 3 billon bases (National Human, 2008), 99% of these bases are the same in all humans (â€Å"U.S. National†, 2009), and the order and amount of the bases determines that humans unique self (Rubenstein, 2006). Bases are connected by hydrogen bonds, base pairing is very specific; Adenine only with Thymine and Cytosine only with Guanine (â€Å"Comptons†, 2008). Each DNA that contains instructions, that makes protein, is considered a gene; gene size varies from 1 thousand bases to 1 million bases (â€Å"National Human†, 2008). A gene carries genetic information during reproduction (â€Å"Wikipedia†,2009). DNA consists of thousands of chemical units called nucleotides (Rubenstein, 2006). Nucleotides are linked together by covalent bonds; linking phosphate of one to sugar of the next (â€Å"Comptons†, 2008). Like genes the exact amount and order of Nucleotides varies, making the person only themselves (Rubenstein, 2006).

Quantitative Research Process Essay

1. Research problem and Purpose is the area where research is needed to close the gap between knowledge and nursing practice. Purpose identifies the specific goal of the study (Burns & Grove 2011). 2. Literature Review identifies the known and the unknown of a particular study and documents what needs to be conducted. 3. Framework is the basis for the study or a theory that has been developed consisting of concepts and statements that define a particular study. 4. Research Objectives, Questions, and Hypotheses narrow the gap beteween research problem and purpose and identify the relationship between the variables and indicate the population to be studied. 5. Study Variables that are measurable, manipulated or controlled in a study. 6. Assumptions are statements that are considered true and implanted in thinking and behavior. 7. Limitations are restrictions that decrease credibility of findindgs. 8. Research design is the blueprint for the study that increases control over factors that may interfere with the desired outcomes. 9. Study Population include all elements that meet qualifications for the study and the sample are subsets of the population selected. 10. Method of Measurement is the process of assigning numbers to objects. Levels of measurement include nominal, ordinal, interval and ratio level of measurements. 11. Data collection is the systematic gathering of information important to the research purpose in which permission must be obtained for the agency where the researcher conducts the study. 12. Data analysis gives meaning to the study. Analysis techniques include descriptive and inferential analyses. 13. Research Outcomes involves examining results from the research process and considers implications for further studies. References Burns, N.,Grove, Susan. (2011). Understanding Nursing Research: Building and Evidence Based Practice. (5th ed.).Maryland Heights, MO: Elsevier Saunders.