GMS 724 Quiz: GMS 724 - Chapter 8 - How Companies Use Foreign Exchange - Part 2
30 Jan 2019
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Chapter 8 - how companies use foreign exchange: part 2. Business purposes (ii): other financial flows: companies may have to deal in foreign exchange for other reasons, for example, if a u. s. company has a subsidiary in the united. Kingdom and the subsidiary sends a dividend to the parent company in british pounds, the parent company has to enter into the foreign- exchange market to convert pounds to dollars. If it lends dollars to the british subsidiary, the subsidiary has to convert the dollars into pounds: when paying principal and interest bank to the parent company, it has to convert pounds into dollars. In recent years, the advent of e-trading has attracted a lot of day traders in foreign exchange: the problem is that day traders rarely make money speculating in exchange rates, forecasting currency movements is a risky business.
