Sample Term Paper

Theories with regards to the global money system also assume greater importance as businesses become more international. Australia’s floating exchange rate presents companies with some thought with regards to expansion overseas and the trade carried out by the company (Levi 2004).

Since the floating exchange rate reflects the credits and debits in the balance of payments, it will be subject to perpetual change. This creates a degree of uncertainty for businesses with global operations as they may see the value of their holdings appreciate or depreciate with regards to the exchange rate. Australian businesses going overseas like Pacific Brands may thus have to make use of external and internal hedging techniques to even out their projected cash flows to judge viability of different projects. Businesses in Australia that import materials may experience fluctuating costs as the Australian dollar rises and falls (Levi 2004). Furthermore, multinationals in the country may incur problems in terms of the profits they are able to transfer overseas which may be subject to the change in currency value.

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