Arkansas, Inc , exports to various less developed countries and its receivables are denominated in the foreign currencies of the importers It considers reducing its exchange rate risk by establishing small subsidiaries to produce products By incurring some expenses in the countries where it generat...

Arkansas Inc could be more exposed to political risk a ...

Arkansas, Inc., exports to various less developed countries and its receivables are denominated in the foreign currencies

Question:

Arkansas, Inc., exports to various less developed countries and its receivables are denominated in the foreign currencies of the importers. It considers reducing its risk by establishing small subsidiaries to produce products. By incurring some expenses in the countries where it generates revenue, it reduces its exposure to risk. Since September 11, 2001, when terrorists attacked the United States, it has questioned whether it should restructure its operations. Its CEO believes that its cash flows may be less exposed to risk but more exposed to other types of risk as a result of restructuring. What is your opinion?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...