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DCS mainly sells and supplies large volumes of data communications components to original equipment manufacturers (OEMs), 30% of which are based outside Prydain on a continent which has a single currency which is devaluing against the Prydain dollar.
If the devaluation happens why will i get less amount of revenue from customer?
Let’s take a concrete example. Say that the current £ to US$ exchange rate is 1.2$ to 1£ and that DCS is in the UK selling to the US.
If a product sells for £1000 in the UK it will sell for $1200 in the US.
If the exchange rate moves to 1£ = €1.5, the dollar has devalued because it takes more of them to be worth 1£.
The goods selling for £1000 in the UK would now sell for $1500 in the US (assuming profitability per unit is to be maintained)
Therefore, the price for a US customer has moved from $1200 to $1500. The price rise will normally reduce demand and sales volumes and also it might make competing products made in the US more competitive so customers may switch to them.
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