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Essay / Research Paper Abstract
This 6 page paper looks at the impact that exchange rates can have companies undertaking international business. The paper considers the position of to companies in the US and the impact that a change in the exchange rate with the Chinese and one would have on their profitable cost structure. The two companies considered are Yum! Brands and WalMart. The impact of the exchange rate changes, where there may be harmful beneficial and strategies or tools which may be utilized to reduce risk all discussed. The bibliography cites 3 sources.
Page Count:
6 pages (~225 words per page)
File: TS65_TEyuanus.doc
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Unformatted sample text from the term paper:
government effectively fix the exchange rate, allowing it to move in only a narrow band. There have been pressures for the band to be changed to allow the currency to
appreciate, with the US arguing that the exchange rate, which is set against the dollar, is too low and disadvantages the US and other countries by with a currency that
is artificially constrained. The problem with an undervalued currency is it keeps the prices of imports into the country high and keeping export prices low making those exports attractive to
other countries. As the Chinese Yuan has the exchange rate that is controlled by the government this means there is the potential for major changes to the exchange rate
to be implemented at the whim of the government regardless of the market forces. This may be seen as increasing the risk associated with doing business in China. Pressures
have been brought to bear to allow the currency to float, or at least appreciate (increase), the value of the currency. However, just as the government may increaser the value,
they may also seek to serve their own interests and depreciate (decrease) the value further. If the Yuan value is deprecated a further 20% this will have a financial
impact on US firms, the impact will depend on the type of transactions undertaken by the US firm. Two major companies that deal with China are Yum! Brands, the owner
of a range of mass market restaurants, and WalMart, the worlds largest retailer. The impact on these two firms will be different due to the nature of the transactions.
Yum! Brands received a profit of $908 million in 2011 from the Chinese operations. The dollar value given is the amount that was received after the profit which was earned
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