In: Finance
Currency analysis of Merck & Co.
Why you can say Euro and Yen are exposed to the company. This can be due to its business structure (i.g. location of factories, customers and suppliers, and the currency that the products/services are quoted), and arising from the competition against its rivals.
State references.
Merck & co is an American multinational pharmaceutical company which has exposure in European markets as well as Japanese market so they are having their medical facilities in European Markets and Japanese markets as well so there medicines are sold in these Markets and it can be said that the receivables are generated in euros and Yen respectively for this company.
This is due to the location of the factories as well as there are consumers and suppliers as well in those countries and there are local competitors available also for Merck and hence they will be exposed to currency fluctuations of Yen well as euros .
Merck is having their major operations in American markets and if their receivables are in euros and Yen and when there would be divergence of dollar against these currencies and there will be depreciation of their foreign currency like Euro & Yen, then the overall receivables for the company will be decreasing and it can be said that it will be leading to decrease in the margin for the company so it is exposed to the currency fluctuations of Yen and euros.
Merck & co is having a major supply in Europe and Japanese market and they have even established their factories in order to counter the rate of exchange fluctuation due to domestic set off, and hence their receivables has been hedged to certain extent but they need to incorporate these transaction in their main parent books and hence it can be said that they are exposed to the volatility of the exchange rate of Yen and Euros in respect to the dollars.