• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

Economic risk

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Economic risk

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 2, 2021 at 6:37 pm #622824
    AshleyMarc1997
    Member
    • Topics: 48
    • Replies: 24
    • ☆☆

    Please correct me If I am wrong anywhere!

    Sir, there is an example (in Kaplan text) which says:

    [Question]
    A US exporter sells one product in Europe on a cost plus basis.

    The selling price is based on a US price of $16 to cover costs & provide a profit margin.

    The current exchange rate is €1.26 = $1

    What would be the effect on the exporter’s business if the dollar strengthened to €1.31 = $1?

    [Answer]
    Kaplan has provided the answer for which I have no clue about what it is saying so I asked you instead.

    Since the seller invoice in Local Currency ($) so the seller is not affected by the changes in Foreign Exchange rate risk. We can see that Foreign Currency (€) has depreciated over the period which means that Foreign Customer is affected & he has to pay more €’s now.

    BUT as you can see Foreign Currency has depreciated which means we have strengthened in our Local Currency ($) then why do we not get received more in $’s (since we sell goods to the customer)?

    I thought foreign exchange has two-sided effect (one is on the customer & the other is on the seller)?

    Confused here and Need your help! Thank you 🙂

    June 3, 2021 at 6:54 am #622871
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    Foreign exchange does not have a two-sided effect.

    If I am in a Euro country and you are in a dollar country and I pay you in euros, then it is only you who has a foreign exchange problem because you have to convert the euros into dollars.

    If I pay you in dollars the you do not have a foreign exchange problem because you are in a dollar country. I have the foreign exchange problem because I will have to buy dollars to be able to pay you in dollars.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • askar.turganbayev@gmail.com on AA Chapter 2 Questions
  • RashidMh on MA Chapter 1 Questions Accounting for Management
  • John Moffat on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)
  • John Moffat on Accounting for Management – ACCA Management Accounting (MA)
  • Hsaini on Accounting for Management – ACCA Management Accounting (MA)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in