8-1 Discussion: Currency Considerations
Suppose a U.S. wood-products company has facilities and employees in Canada providing its raw materials (wood), but has most of its sales in the United States.
(1) What are the most important operational and financial risks in this arrangement? (2) How can the company pay its Canadian employees, who presumably want Canadian dollars, when its U.S. customers are paying in U.S. dollars? Furthermore, how can it calculate its profit if revenue is in U.S. currency and most of its costs are in Canadian currency?
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US Woods Products Company
A US wood products company operating in Canada with all its employees and facilities will undergo high operational and financial risk. The advantage of this investment is the lower cost of production in Canada compared to the hefty prices in US.
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