Coca Colas Exposure Management

Coca Cola is a good example of how MNCs use operational techniques and financial instruments for their foreign-exchange exposure management. Because Coca Cola earns about 80 percent of its operating income from foreign operations, foreign-currency changes can have a major impact on reported earning. The company manages its currency exposures on a consolidated basis, which allows it to net exposures from different operations around the world and takes advantage of natural offsets - for example, cases in which Japanese yen receivables offset Japanese yen payables. It also uses financial contracts to further reduce its net exposure to currency fluctuations. Coca Cola enters into currency forward contracts and purchases currency options in several countries, most notably the euro and Japanese yen, to hedge firm sales commitments. It also buys currency options to hedge certain anticipated sales.

Source: J. D. Daniels, L. H. Radebaugh, and D. P. Sullivan, International Business: Environments and Operations, 10th edn, Upper Saddle River, NJ: Prentice Hall, 2004, p. 620.

Was this article helpful?

0 0
Forex Trading Manual

Forex Trading Manual

In  any  business  or  moneymaking  venture,  preparation  and foreknowledge are the keys to success.   Without this sort of insight,  the  attempt  to  make  a  profitable  financial  decision can only end in disaster and failure, regardless of your level of motivation  and  determination  or  the  amount  of  money you plan to invest.

Get My Free Ebook

Post a comment