Great east Toys is trustworthyly facing press issues with regard to its currency exposure. A large portion of the strongs sales are to European and US customers, and results in incoming cash flows denominated in DEM and US$. Moreover the ships company has a significant amount of debt denominated in Yen and their realization is being cut in HK$ to about 25M. Finally, as an exportation company, the firm is facing a margin squeeze as the rate of inflation in Hong Kong is increasing relative to the US, save the currency remains pegged to the US $. As such, Great Eastern Toys is evidently a company that needs finance its works capital needs and hedge its currency exposure. In our overcompensate we explore the different options for Great Eastern Toys and recommend utilise a combination of forwards and money market place hedges.
The current company situation can be summarized as follows:
In the past 2 course of instructions(1996-1998)| GE borrowed large amount ST debt to finance working capital needs|
Oct, 1997| Total ST debt > HK$ 50 MillionNEW: swear was forced to limit its lending to HK$ 25 million|
land up of June, 1998| GE borrowed HKD 24.45 million (besides the ST debt in HK$) other loans totaling YEN one hundred twenty million = 6.64 million HK$ (exchange rate = 30 June 1988 YEN18.
1/HK$)7year note, 6% kindle to be taken in 1994 amortized 10 million hurt every 6 months On 30 June 1998, YEN 60 million is outstandingShort Term RMB debt consisted of Current LT debt (Yen 10 million) + 6-months Euro-Yen loan (Yen 50 million) , and 4.5% interest(this loan had been reduced at the beginning of 1998 from an original YEN150 million)CONCERN: Nipponese bankers would ask to repaid the remaining amount by the end of the year|
1997-1998 fiscal year| Half of sales were made in the US, half were made in Europe. This amounts to 125M HK$ in the US market and 115M HK$ in EuropeUp to now, these had been invoiced in various currencies with Deutsche Marks, Sterling and French FrancsNEW: they would express to be invoiced...If you want to get a full essay, inn it on our website: Orderessay
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