Here is the synopsis of our sample research paper on Financial Risks of Diversification. Have the paper e-mailed to you 24/7/365.
Essay / Research Paper Abstract
Companies choose to expand and diversify for many reasons, this 4 page paper considers the different risks, such as exchange rate fluctuations, interest rate risk, inflation risk and political risk, as well as the potential benefits such as spread of risk and increased income. The bibliography cites 6 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEfinrisk.rtf
Buy This Term Paper »
Unformatted sample text from the term paper:
to benefit from later period of higher income, or where demand exceeds supply and there are superior profits. However, other attractions may also include the understanding and gaining of
benefits due to diversification. However there are many risk associated with this type of venture. One of the main risks may be that of the currency rate exchange, the
fluctuations may turn a loss into a profit or a profit into a loss (Nellis and Parker, 2000). The role of supply and demand is the main factor in the
determination of currency exchange rates. Where there is a greater demand for currency the value against other currencies will increase, where the demand falls there will be a decrease in
the value. There are many factors that will impact on the demand for the currency (Nellis and Parker, 2000). Demand may be impacted
as a result of internal or external economic conditions, the political situation or even interest rates. The political situation will be one factor which will determine the exchange rate. Where
a political system is seen as stable and long lasting there will be a greater stability to the currency meaning the value is less likely to fluctuate, where there is
weakness or uncertainty this is reflected in the economic outlook of the country (Ploeg, 1994). In turn this will then impact on the supply and demand of the currency, decreasing
the demand and reducing the strength of the currency. Therefore, there is greater risk in politically insecure countries in addition to the direct risks.
Inflation can also be seen as impacting on a currency exchange rate. Inflation effects the demand for goods between countries, where inflation is high the result is an
...