Sourcing inputs from France instead of the United States is an example of:

Question

BlackTom AI · Accepted Answer

Shifting the physical source of inputs from the United States to France is a classic example of production management of exchange risk because it changes the firm’s operational exposure to currency movements by relocating where inputs are procured.

1. Relevant knowledge points and concepts
- Exchange (currency) risk arises when cash flows, costs, or revenues occur in different currencies.
- Management approaches: production (operational) management, marketing management, planning/forecasting, and financial (hedging) management.
- Production management of exchange risk involves altering the location of production, sourcing, or supply chain to match currency exposures or reduce mismatch.

2. Step-by-step reasoning
- Initially, the firm sourced inputs from the United States (payments in USD). If the firm’s revenues are in euros, a depreciation of the euro vs. the dollar would raise input costs in euro terms, creating currency exposure.
- By switching suppliers to France, payments are made in euros (or at least closer currency alignment), so input costs move in the same currency as revenues.
- This operational change directly reduces or eliminates the exposure created by currency fluctuations without using financial instruments; it is an operational (production/sourcing) decision.

3. Calculations
- No numeric calculation is required; the logic is qualitative: matching currency of costs to revenues reduces exchange-rate induced variability in domestic currency profits.

4. Why the correct answer is correct
- The action changes the production/sourcing location to manage currency exposure. This is precisely what “Production Management of Exchange Risk” means: using operational choices (where to produce or source) to mitigate currency risk.

5. Why other options are incorrect
- Marketing Management of Exchange Risk: would involve changing markets served, pricing strategies, or invoicing currency—focused on sales/market-side, not sourcing location.
- Planning for Exchange Rate Changes: refers to forecasting or strategic anticipation (budgeting, scenario analysis), not an operational relocation of suppliers.
- Financial Management of Exchange Risk: involves using financial instruments (forwards, options, swaps) or financing strategies to hedge currency risk rather than changing where inputs are sourced.

6. Conclusion
Therefore, sourcing inputs from France instead of the United States is an example of Production Management of Exchange Risk, which matches the provided correct answer.

Sourcing inputs from France instead of the United States is an example of:Single choice

Similar Questions

A domestic firm can minimize the negative effects of an appreciation of the domestic currency by: Check all correct answers Each choice is worth 1 point, which you will receive if you correctly either check or do not check the choice

A domestic firm can minimize the negative effects of an appreciation of the domestic currency by: Check all correct answers Each choice is worth 1 point, which you will receive if you correctly either check or do not check the choice

StuffNThings Co., a Wonderland company, must pay a factory in Neverland 8 million WLB for a shipment of toys in 6 months. StuffNThings Co. faces:

If a U.S. firm's expenses are more susceptible to exchange rate movements than its revenue is, the firm will if the dollar .

MNCs are best-placed to respond to unexpected changes in exchange rates if they:

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

Sourcing inputs from France instead of the United States is an example of:Single choice

Similar Questions

A domestic firm can minimize the negative effects of an appreciation of the domestic currency by: Check all correct answers Each choice is worth 1 point, which you will receive if you correctly either check or do not check the choice

A domestic firm can minimize the negative effects of an appreciation of the domestic currency by: Check all correct answers Each choice is worth 1 point, which you will receive if you correctly either check or do not check the choice

StuffNThings Co., a Wonderland company, must pay a factory in Neverland 8 million WLB for a shipment of toys in 6 months. StuffNThings Co. faces:

If a U.S. firm's expenses are more susceptible to exchange rate movements than its revenue is, the firm will ____ if the dollar ____.

MNCs are best-placed to respond to unexpected changes in exchange rates if they:

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

If a U.S. firm's expenses are more susceptible to exchange rate movements than its revenue is, the firm will if the dollar .