Question

As a manager of an MNE( Multinational Enterprise) what are the implications of a STRENGTHENING DOMESTIC CURRENCY on a companies?

A. Profits

B. Revenues

C. Exports/Imports

Answer 1

Being a manager I believe that the implications of a "strengthening domestic currency" on companies Profits, Revenues and Export/Imports are as follows:

A. If there is rise in currency, it is a positive signs for the any company because the prices of the material and goods remains same and the expenditure on the manufacture of the goods decreases due to the rise in the domestic currency.

B. The profit will rise and the revenue for the company increases because they are selling goods on the same price tag and expenditure has already reduced due to the currency benefits.

C. Strengthening the domestic currency will give more benefits if Multinational company exports goods to the other country because the other country has to pay with their currency in accordance with the increased rates of the exporter country.

and In case of Imports, other country import some goods and now the payment is made by the importer country as the domestic currency is risen we will make the payment in accordance with currency of the exporter country and it will be beneficial in terms of currency for the importer country (domestic country).

Due to the strengthening in the the currency the sales increases the revenue and profit/net income is the part of Gross revenue s earned by the company and when the operating expenditure reduces but the revenue is higher so the Profit or net income will automatically rise.