The implications of the deviations of the purchasing power Essay

The implications of the deviations of the purchasing power - Essay Example The deviation from PPP will also result in the variation of operating margins significantly. This will in turn affect the competitiveness of the multi-national companies. The main reason for the failure of Law of One Price is the presence of transaction cost. When the deviation of the exchange rate from PPP raises, arbitrage forces will later on become more strong. For a company who deals with differentiated goods, by grouping under one category, the PPP will deviate and this will result in increase in arbitrage forces.Question 2: You are hired by a South African firm with all local costs that has recently entered the export market. The firm prices their contracts in US$, as this is necessary to gain market share. They now realize that with 25% of sales as exports, they face a reasonably sized exchange rate exposure and are not sure whether they should hedge it or not. Knowing that you have training in international financial management, they ask you for advice. Provide a summary of your response on the types of foreign exchange risk this company faces and whether the firm should hedge the exposure. The Company Faces Transaction Risk and Economic Risk:â€Å"Transaction risk, which is basically cash ï ¬â€šow risk, deals with the effect of exchange rate moves on transactional account exposure related to receivables (export contracts), payables (import contracts), or repatriation of dividends. An exchange rate change in the currency of denomination of any such contract will result in a direct transaction exchange rate risk to the ï ¬ rm†.

Aviation Safety Questions Essay Example | Topics and Well Written Essays - 2000 words

Aviation Safety Questions - Essay Example Of course the responsibility lies with the air carrier to safeguard their customers, their employees and provide them proper working environment in every possible way, but it is in their best interest as well so to say, as regards to business point of view, because statistics have shown that an aircraft accidents’ true cost in claims, lost employee time or use, and lost customers is 4 times the actual cost of the accident. For example, US Air estimates that the Pittsburgh accident’s actual cost was 30 to 40 Million dollars. This means that the accidents true cost is somewhere around 140 Million dollars. The FA act charges the FAA with the responsibility for promulgating and enforcing adequate standards and regulations (Alexander & Clarence, 2004). The main focal point of any Air Carrier Safety Program is the Safety Officer. Sometimes those that see the best are those that are not as close to the situation. To ensure safety, an outsider like safety officer is a very practical solution. FSDOs nationwide handle the dual function of safety inspection and advice for airline. Local FSDOs conducts several types of inspections on each airline’s maintenance and operations functions. If a certificate holder fails to comply, section 609 of the FA act specifies that the FAA may reexamine any certificate holder or appliance. Inspectors periodically conduct maintenance base inspections which focus on the record kept by an airline like airworthiness directives compliance, and conduct shop inspections to observe maintenance procedures and carry out ramp inspections to observe the airworthiness of the aircraft. A similar operations base inspection focuses on records concerning the hours of training and check rides given pilots and the rest periods between duty shifts given crews as required by regulations. En route inspections involve inspections of