The following website provides annual reports of numerous MNCs: www.annualreports.com. You may also access annual reports via the FT website www.ft.com and international reports via www.forbes.com, choosing ‘Lists’ or you may simply search online for ‘ annual report pdf’. AstraZeneca is one example of a suitable company.

a Review an annual report of an MNC of your choice. Look for any comments that relate to the MNC’s economic or translation exposure. Does it appear that the MNC hedges its economic exposure or translation exposure?

If so, what methods does it use to hedge its exposure?

b Assess the effect of foreign exchange movements on the profitability of the company. (Hint: search the annual reports using the keyword ‘risk’. You will find the MNC’s policy on currency risk. Fuller details are given by the major multinationals. These can include: estimates of the sensitivity of profits to a 1 per cent currency change;

derivative returns from currency change; the main types of hedging used and principal type of exposure. Do not just report their calculations; make your own estimates from the data provided. Not all items will be fully explained in the report – make that clear in your analysis.)

The following questions relate to this summary income statement for YTR plc who exports to the EU and prices such goods in euros:

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GBPEUR 1.1 Foreign Es Domestic s Total s Sales 50,000 50,000 95,455 Cost of sales 60,000 60,000 Gross profit 35,455 Expenses 5,000 10,000 14,545 Net profit 20,909