Question

why analysts might remove foreign exchange gains or losses when analyzing revenue and expenses for the year.

Answer 1

Foreign exchange gains or losses don't occur when a business is not involved in foreign transactions or when a business confines its market to its domestic country. They don't occur due to the day to day activities of business.

Foreign exchange gains or losses are not occured because of the inefficiency of business people but occur due to uncontrolled exchange price fluctuations among different countries.

Foreign exchange gains or losses can be avoidable while the normal revenues and expenses are not avoidable as they are essential to carry out any business.

Foreign exchange gains or losses are not controlled but can only be hedged to reduce loss, while normal expenses cannot be hedged.

Revenues can be increased and expenses can be reduced by taking some measures in business, while foreign exchange losses or gains can't be avoidable completely.

If a business is run effectively and efficiently, its revenues can be increased and expenses can be reduced, but the foreign exchange gains and losses can't be increased nor decreased. Their incurrence is not within the hands of the business people.

An inefficient business might get more foreign exchange gains and an efficient business might get more foreign exchange losses. When, analysts consider them along with revenues and expenses, the true position or analysis of a business would not be done.

Hence, analysts might remove foreign exchange gains or lossed when analyzing revenue and expenses of a business for a year.