Essay Managing Exchange Rate Exposure Report – Management Assignment Help

Assignment Task :

Task:

TASK OVERVIEW
Lecture 5 introduces the foreign exchange market with a particular focus on forecasting exchange rates and the basics of currency-related derivatives and their use in mitigating exchange rate risk. Lectures 6 and 7 introduce various forms of exchange rate exposure that MNCs faces and highlights the various mechanisms to mitigate exchange rate risk exposure. Building on the concepts primarily related to Lecture 5, 6, and 7 this Managing Exchange Rate Exposure Report aims to test and expand your understanding to assess the value of forecasting exchange rate, the most suitable methods of managing exchange rate risk for Nike Limited.

2. MAJOR TASK DETAILS
PART ONE:
Understanding the Nature of Exchange Rate Exposure Nike Faces
The task requires you to review the annual report of Nike Limited for 2020 (available in the LMS Assignment Section) and identify the following:
• Nature and the major sources of exchange rate risk exposure Nike faces.
• Briefly explain the types of exchange rate risk exposure and their specific nature. Preferably examples.
• The risk tools management applied to hedge these risks by Nike.
In addressing the above tasks students should review the annual report. Specifically, Part 1

Prepared by Dr Muhammad Al Mamun for FIN3IFM Students Page 2 of 4 of the report covers the nature of the firm’s business (Item 1 and 1A), Part 2 management discussion section (Item 7), and relevant section of financial and operating highlights.

PART TWO:
The expected operating result for quarter 3 (Q3), 2021 for Nike’s US and Chinese operations is provided below.

Expected Q3 RESULTS OF OPERATIONS

North America ($) China (Yuan)
Sales 14448.00 44526.67
(-) Cost of sales (materials & labor) 6000.00 39688.72
Gross Profit 8448.00 4837.95
Demand creation expense 1500.00 3526.22
Operating overhead 1000.00 29235.06
Total operating expenses 2500.00 32761.28
Operating Profit 5948.00 -27923.33
Interest expense 43.00 48.48
Cash flow before tax 5905.00 -27971.80