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HSC Business Studies Question Thread
fizzy.123:
What is the difference between social responsibility and environmental sustainability? (Operations)
arsh.rampal:
--- Quote from: itsAnuu on October 27, 2016, 06:24:18 pm ---What is the difference between hedging and derivatives? I have everything in the syllabus under control except this confusing thing.. Pls detailed and examples of each :)
--- End quote ---
Hey,
Hedging helps reduce the level of uncertainty by minimising the risk of currency fluctuations as exchange rates during spot transactions, also known as spot exchange rates may not always be the best rate.
One method/ example of hedging is natural hedging in which businesses establish offshore subsidiaries. These allow for the business to arrange for import/export payments/receipts in the same foreign currency, but mainly insisting that both import and export contracts are denominated in Australian dollars.
Derivatives on the other hand are financial instruments that are used to lessen exporting risks again brought about by currency fluctuations. Hence, they are basically hedging but through financial products. Three main examples of derivatives:
- Forward Exchange Contract:
Contracts to exchange currency at agreed future date at an agreed rate. A bank guarantees this exporter within the set time, and also sets a fixed rate of change for the money generated from the sale of exported goods.
- Options Contract:
These give the buyer the right, but not the obligation to, to buy or sell foreign currency at some time in the future at an agreed price. The options holder is protected from unfavourable exchange rate fluctuations but is allowed to 'gain' should exchange rate movement be favourable for them.
- Swap Contract:
This is an agreement to exchange currency in the spot market with agreement to reverse transaction later. This is mainly used when businesses need to raise finance in currency issued by another country in which they are not well known and are forced to pay higher interest rate than other locals.
Hope that helps!
arsh.rampal:
--- Quote from: fizzy.123 on October 27, 2016, 06:51:37 pm ---What is the difference between social responsibility and environmental sustainability? (Operations)
--- End quote ---
Simply put, environmental sustainability, or acting in an environmental friendly way falls within the broader idea of social responsibility which also deals with the management of social, political and human consequences of actions!
isaacdelatorre:
--- Quote from: itsAnuu on October 27, 2016, 06:24:18 pm ---What is the difference between hedging and derivatives? I have everything in the syllabus under control except this confusing thing.. Pls detailed and examples of each :)
--- End quote ---
Hey there,
The others have already explained the difference, but here's my two cents on the topic.
Hedging is any action a business does to minimise fluctuations in the exchange rate. A business will usually want to do this as it could significantly increase costs if the exchange rate depreciated and we wanted to buy goods from another country.
A business can do this through natural hedging - i.e. within the business' control:
Natural hedging strategies normally surround the idea of having everything done in one currency so that the exchange rate doesn't affect the business - it may affect other firms that you are trading with though.
I.e. if you have everything done in USD, you buy $100 USD worth of goods, you will only pay that much; regardless of what the exchange is; same as if you are owed $100 USD, you will only receive $100USD even if the AUD is worth more.
Derivatives are a financial instrument that can be used to minimise the effects of exchange rate fluctuations. They are a form of hedging that a business can purchase. The types have already been explained.
Hope this helps!! :)
Deng:
Hey can someone help break this down for me
Right now ethical issue i got is environment , would the legal issue be production methods and outdated tech?
Would conflict resolution - grievance procedure/other forms of ADR be correct in satisfying the employee and employers conflict ( also bring in pay since there is over pay and plan to outsource )
And how would i answer the last bit ?
Would i take about increasing environmental conscience of the community and how the business' lack of regard for environment can damage their reputation and consequently sales ?
Thanks
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