Foreign Currency Exposure: A Comparison of Tools and Methods Employed by Apple Inc and Samsung

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Apple INC – Stock Code - APPLE , Stock Price –
186.40
Samsung – Stock Code - SSNLF , Stock Price –
44.20

Table of Contents
TOOLS AND METHOD EMPLOYED BY APPLE INC 2
Options Contract 2
- Forward Contracts 2
- Swaps 2
TOOLS AND METHOD EMPLOYED BY SAMSUNG 3
Option Contracts 4
Forward Contracts 4
Swaps 4
COMPARISON 5
CRITICAL EVALUATION 6
CONCLUSION 8
REFERENCES 8
TOOLS AND METHOD EMPLOYED BY APPLE INC
The company which has been selected for the purpose of the analysis is Apple Inc. The company
is the manufacturer of the computer hardware, computer software and electronic products and
services (Apple, 2017).
For the purpose of analyzing the foreign currency transaction exposures, the annual report for
the year ending 30th of September 2017 have been considered. The company under the Item 1 for
the risk factor has mentioned that the financial performance of the company is subject to the risk
which is associated with the change in the dollar and local currencies. Following tools and
methods have been employed by the company for managing the foreign currency exposure:
Although there are many systems available through which the foreign currency exposure can be
minimized. The company has adopted the system to have the derivative financial instrument in

order to cover the risk exposure of the company towards the foreign currency. The company has
installed the system to use the derivatives so as to partially offset the exposure to foreign
currency exposure. The company has mentioned three tools and methods for offsetting its
business exposure. The company has not adopted the futures contract (Apple, 2017, pp 54). The
tools are as follows:
- Options Contract - Under this, the company will have the right to buy or sell the
currency. Two options have been adopted call and put option. The option carries the right
but not the obligation to purchase or sell. The price is already determined and that too
have to be settled within the period of time. The company has followed the same (Apple,
2017, pp 54).
- Forward Contracts – It is created for the specified period of say six months and it
gets rolled over for another six months and so on. The company has entered into for the
purpose of hedging of the currency exposure. These are executed on the end of the
maturity period. It is generally the medium of having the insurance for the change in the
prices if any in future. Therefore, it is considered as the best way of saving the exposure
limit (Apple, 2017, pp 55).
- Swaps – Through this the company’s foreign currency denominated term debt has been
managed and these are known as the cash flow hedges. Swap includes the multi payment
in future years. A single period swap is the forward contract. Sometimes the swap may
happen in the multiple dates which cannot be inferred from the annual report of the
company but it generally happens in case of the companies having the large value
transactions (Apple, 2017 – Pp 54-55)..