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Good day sir,
I am having a problem with part of a question in the BPP kit – (MJY 12/05).
I do not grasp how the netting off is calculated in part (b).
I understand that dollars and euros must be netted as far as possible. However,
the calculations seem to baffle me. please assist me with this.In particular i dont understand how the $ hedged amount figure is derived ( 90+50+40+20+30-170-120-50 = $110,000 Receipt). Maybe i am reading the table given in the question incorrectly?
I think the easiest way to interpret the table is as follows:
Remember we are only interested in receipts and payment outside of the group, so ignore any receipts/payments within the group.
So…..dollar receipts by MJY and subsidiaries from the other 4 companies are: 90 + 40 + 20 + 30 = 180
Dollar payments by MJY and subsidiaries to the other 4 companies are 170 + 120 = 290
So a net receipt of 290 – 180 = 110
Hope that helps 🙂
I think the easiest way to interpret the table is as follows:
Remember we are only interested in receipts and payment outside of the group, so ignore any receipts/payments within the group.
So…..dollar receipts by MJY and subsidiaries from the other 4 companies are: 90 + 40 + 20 + 30 = 180
Dollar payments by MJY and subsidiaries to the other 4 companies are 170 + 120 = 290
So a net receipt of 290 – 180 = 110
Hope that helps 🙂
Thanks sir however i’m still a bit puzzled but not as much as before. Please see below;
“Dollar payments by MJY and subsidiaries to the other 4 companies are 170 + 120 = 290”
Why was the dollar payment of $50 made by Subsidiary 2 excluded in this computation?
Because it was made within the group (it was from Subsidiary 2 to MJV).
We are only looking at payments/receipts outside of the group.
Dear NR Moffat,
You mentioned that only receipts/payments that are outside the group are interested. Is it because the payments/receipts within the group will be offset to nil, ie. total payments will equal total receipts?
Thanks,
Hanhvn
I should have typed Mr Moffat, not “NR Moffat”. I am sorry about that, Mr Moffat.
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