SKF is a company with a long h

SKF is a company with a long history behind. It was founded in 1907. It started as a manufacturing company and soon became the leading manufacturer in the bearing industry and has maintained this position ever since. Recently, service business is also becoming an increasingly important part of the SKF Group’s operations. SKF’s central office is in Gothenburg. The company has a network made up of its own sales companies in some 50 countries, plus more than 7000 independent distributors and dealers worldwide. SKF manufactures its products at some 80 production sites in 22 countries. The SKF business is organized in six Divisions and one area covering operations related to the aviation industry. SKF is a one of the biggest joint ventures in Sweden. The main products of the company are bearings, seals, and special steel and steel components. The company is quite successfully trying to reach that the subsidiaries would have less difference between export and import or, in other words, that most of cash outflows would be covered by cash inflows in foreign currency. This, is considered to be a very favorable condition for the natural hedging strategy. During 1999, SKF increased its earnings due to the inventory, real estate and employee’s reduction carried out in the context of weak market demand. The latest two areas have high priority and are growing both organically and by acquisitions. The company is also going to go on with the reshaping program, selling out unprofitable business and looking for new perspective areas. The financial objective the company set itself, as it was indicated in annual report, is value creation for its shareholders. The financial risk management objective, the representative of the company defined as: “not to have any unexpected surprises” or in other words cash flows smoothing. The Group’s financial policy defines currency, interest rate and credit risks, establishes responsibility and authority for managing these risks. The policy states that the objective is to eliminate or minimize risk and to contribute to a better return through an active management of risks. The management of the financial risk, and the responsibility for all treasury operations, are largely centralized which means that all the currency exchange operations inside the company or with the other companies, exposure measurement, hedging and financing operations are made there. Required: ? Critically evaluate the effectiveness of this firm’s hedging policy (6 Marks) ? To what extent can management of financial risks contribute towards the attainment of the firm’s stated financial objectives (4 Marks) ? Suggest and explain any two possible strategies this firm may apply to measure their currency exposure (4 Marks)

Place this order or similar order and get an amazing discount. USE Discount code “GET20” for 20% discount

Posted in Uncategorized