Question

In: Finance

How does hedging improve a company’s borrowing capacity? For example, Apple?

How does hedging improve a company’s borrowing capacity? For example, Apple?

Solutions

Expert Solution

Hedging is a risk management strategy which intends to reduce the fluctuations in cashflow or profit by a company. Apple has advantages due to hedging in its topline as well as bottomline of profit. The heding are mainly done by apple for currencies since its major transactions are across the globe which creates exchange rate and currency risks.

Due to hedging the risk of Apple in terms of its cashflow significantly came down and due to this the company is producing a stable cashflows. It is already a cash surplus company and due to the already available huge stable cashflow, the credit rating of the company has increased. Since credit rating will be higher for companys which are relatively stable and have consistent cashflows, the borrowing capacity of Apple is sufficiently higher than its peers.

Apple uses Hedging strategies in currency to reduce its foreign currency exposures. It holds currency hedging contracts from which has a carrying value of 132 million in June 2014 quarter and increased to 3.5 billion by Dec 2014 quarter which is intended to reduce the negative impact of increasing dollar value on its profits. Due to such hedging Apple saved more than 600 million in 2015.


Related Solutions

how can Disney improve the current hedging strategy?
how can Disney improve the current hedging strategy?
Global Economy question. How does exchange rate stability affect (1) hedging strategies for Apple, a multinational...
Global Economy question. How does exchange rate stability affect (1) hedging strategies for Apple, a multinational organizations, (2) how it affects the balance of payments. how it can hedge to maximize profits and what strategies can be used to make a positive domestic impact on the balance of payments.
How would the company Apple find hedging important for improving financial forecasts or budgeting?
How would the company Apple find hedging important for improving financial forecasts or budgeting?
1. If the Apple corporation sells a bond it is a)borrowing directly from the public b)borrowing...
1. If the Apple corporation sells a bond it is a)borrowing directly from the public b)borrowing indirectly from the public c)selling shares of ownership directly to the public d)selling shares of ownership indirectly to the public 2. The single most important piece of information about a stock is its a)term b)dividend c)daily volume d)price 3. Which of the following lists is included in what economists call "money"? a)cash b)cash and stocks and bonds c)cash and stocks and bonds and real...
Give an example of qualitative research design in nursing. How does qualitative research improve quality of...
Give an example of qualitative research design in nursing. How does qualitative research improve quality of care and health outcomes?
What is Apple Company’s strategy for success in the marketplace? Does the company rely primarily on...
What is Apple Company’s strategy for success in the marketplace? Does the company rely primarily on customer intimacy, operational excellence, or product leadership? What evidence supports your conclusion? Cite sources
Consider the two articles about Apple Inc.’s hedging policy. "An extremely well-timed currency hedging regimen saved...
Consider the two articles about Apple Inc.’s hedging policy. "An extremely well-timed currency hedging regimen saved Apple Inc. about 70 cents a share — or $4.1 billion — in earnings during fiscal year 2015, analysts…said…” Explain what this hedging regimen was and why it saved Apple Inc. so much money. Under this hedging regime what would have happened to Apple profits if the dollar had depreciated significantly instead of appreciating from mid-2014 to the end of 2015?
Consider the two articles about Apple Inc.’s hedging policy. "An extremely well-timed currency hedging regimen saved...
Consider the two articles about Apple Inc.’s hedging policy. "An extremely well-timed currency hedging regimen saved Apple Inc. about 70 cents a share — or $4.1 billion — in earnings during fiscal year 2015, analysts…said…” Explain what this hedging regimen was and why it saved Apple Inc. so much money. Under this hedging regime what would have happened to Apple profits if the dollar had depreciated significantly instead of appreciating from mid-2014 to the end of 2015?
Apple after Steve Jobs 1) In what product segments does apple compete? How does the company...
Apple after Steve Jobs 1) In what product segments does apple compete? How does the company position its products against its competitors? 2) Perform a SWOT analysis for Apple 3) Analyze Apple's board structure. Are criticisms of Apple's board justified? 4) What does Apple's selection of Tim Cook as Jobs' successor signal about its future strategy? 5) Identify the top challenges that Tim Cook faces. How should he address them?
Why does reflection improve a nurse’s capacity for making future clinical decisions? What is lost if...
Why does reflection improve a nurse’s capacity for making future clinical decisions? What is lost if a nurse does not use reflection?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT