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?
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4y ago#1Let'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.
understood thanks
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