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    Tiffany Case Questions

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    saurabhkalra4u
    Tiffany now faces exchange rate risk due to its new distribution agreement with Mitsukoshi, which exposes Tiffany's yen revenue to fluctuations in the yen-dollar exchange rate. This risk is serious since large currency movements could significantly impact Tiffany's financial statements. Tiffany should actively manage this risk by hedging a portion of its yen exposure for a set time period to reduce volatility, with oversight from senior management and controls to monitor hedging activities.

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    Tiffany Case Questions

    Uploaded by

    saurabhkalra4u
    273 views1 page
    Tiffany now faces exchange rate risk due to its new distribution agreement with Mitsukoshi, which exposes Tiffany's yen revenue to fluctuations in the yen-dollar exchange rate. This risk is serious since large currency movements could significantly impact Tiffany's financial statements. Tiffany should actively manage this risk by hedging a portion of its yen exposure for a set time period to reduce volatility, with oversight from senior management and controls to monitor hedging activities.

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    Tiffany now faces exchange rate risk due to its new distribution agreement with Mitsukoshi, which exposes Tiffany's yen revenue to fluctuations in the yen-dollar exchange rate. This risk is serious since large currency movements could significantly impact Tiffany's financial statements. Tiffany should actively manage this risk by hedging a portion of its yen exposure for a set time period to reduce volatility, with oversight from senior management and controls to monitor hedging activities.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    273 views1 page

    Tiffany Case Questions

    Uploaded by

    saurabhkalra4u
    Tiffany now faces exchange rate risk due to its new distribution agreement with Mitsukoshi, which exposes Tiffany's yen revenue to fluctuations in the yen-dollar exchange rate. This risk is serious since large currency movements could significantly impact Tiffany's financial statements. Tiffany should actively manage this risk by hedging a portion of its yen exposure for a set time period to reduce volatility, with oversight from senior management and controls to monitor hedging activities.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Tiffany Case

    1.

    In what way(s) is Tiffany exposed to exchange-rate risk subsequent to its new distribution agreement with Mitsukoshi? How serious are these risks? Should Tiffany actively manage its yen-dollar exchange-rate risk? Why or why not? If Tiffany were to manage exchange-rate risk activity, what should be the objectives of such a program? Specifically, what exposures should be actively managed? How much of these exposures should be covered, and for how long? As instruments for risk management, what are the chief differences of foreign-exchange options and forward and futures contracts? What are the advantages and disadvantages of each? Which, if either, of these types of instruments would be most appropriate for Tiffany to use if it chose to manage exchange-rate risk? How should Tiffany organize itself to manage its exchange-rate risk? Who should be responsible for executing its hedges? Who should have oversight responsibility for this activity? What controls should be put in place?

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