Assignment
Assessment for Part 1 of International Financial Management
You are required to prepare a report of 2500 words to the Finance Director (William Money) to address concerns raised at the recent Board Meeting for the Directors of the SlowNourish plc supermarket chain (SN).
Background:
SN is a large supermarket based in the UK. The company operates mainly in Europe and the UK. About 60% of its purchases are paid for in dollars and sales are mainly in euros and pounds. Profit margins for SN are low at 3% with average shelf life or stock turnover of about 7 days for perishable foods and 1 month for longer life provisions.
The concerns were as follows:
1) Mr Brick the Estates Director remarked that he thought the IMF was supposed to ensure that the exchange rate did not move greatly. The purchasing Director Mr Cheap thought that the IMF could not do this in the case of the dollar as its balance of payments on the current account was so poor. The legal secretary Mrs Innocent thought that the other Directors were making too much of the problem observing that the price of the dollar did on occasion go up but that it also went down and that on balance there was no effect. The Finance Director promised some notes on the international management of the dollar exchange rate, the recent behaviour of the dollar and what it meant for SN.
(33 marks)
2) The Marketing Director (Mr Selby) announced that SN has been invited tender for an investment in India where they are experiencing difficulties in getting goods from farm to market. However, he admits to not knowing a great deal about the issues and problems of investing in a developing country. The Board expresses particular concern as to the financial implications of such an investment
(33 marks)
3) Finally, Mr Money notes that the value of the dollar has behaved as follows:
the euro as follows:
He observes that: “they are both on the decline so we should definitely be buying more from the US and perhaps cutting back on our sales in euros”. The Purchasing Director laughs and says “These graphs tell you nothing about the future value of these currencies.”
(34 marks)
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