Demand And Supply Of The International Business...

Chapter 7: 1. Exporters typically prefer conservative measures when managing foreign receivables. Because of this, there is a tendency to lean on the side of caution. Describe at least three reasons for this conservativism. Exporters typically prefer conservative measures when managing foreign receivables. Because of this, there is a tendency to lean on the side of caution. Three reasons for this conservatism are described below: 1. Fluctuation in exchange rates: Exchange rates of currencies of different countries fluctuate continuously and in a very random manner with the change in the demand and supply state of the concerned currency. That can translate the profit from the international business transaction into a loss or vice-versa. Thus, the exporters dealing with foreign receivables should be conservative to avoid this risk. 2. The difference in the legal system: Different countries have different legal rules and policies for dealing with and managing the foreign accounts receivable. It is mostly harder for a business to pursue any overdue amounts from an international business due to the difference in the legal system. It is another reason for the conservative approaches of the exporters. 3. Change in export prices: Unexpected change in the commodity prices in a particular country will arise a great risk for the exporters when managing foreign receivables. Change in commodity price will also influence various other costs associated with the export likeShow MoreRelatedFunctions Of Foreign Exchange Markets Essay1656 Words   |  7 PagesWhen different countries enter business together there must be currency conversion, foreign exchange markets exist because there is need to move these currencies around (Murray, Ju, Gao, 2012).. Foreign exchange market is where currencies are traded (worldbank.org). 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