Hedging provides certainty of future cash flows.The companies forgo the benefits of price rise but they are also protected against any dramatic price decline.This helps companies to undertake huge future capital expenditure because they are protected against losses and thus,their income is secured.
Hedging also ensures that dividends are paid to investors at difficult economic downturn and helps the company stay afloat.
How can hedging help with protecting an oil producing company’s income?
Discuss the advantages and disadvantages use of financial instruments for hedging purposes. Discuss whether a UK based airline should consider hedging movements in the oil price. You can use EasyJet Airline as an example to elaborate your arguments, including information about their hedging strategies from the company’s webpage, public relations page and annual report. (1500 words)
Provide an example as to how a firm can use a currency swap for hedging.
how does a business continuity plan help in protecting critical financial informion in the NYC financial servixes industry?
Suppose that Greece and Switzerland both produce oil and olives. Greece's opportunity cost of producing a crate of olives is 5 barrels of oil, while Switzerland's opportunity cost of producing a crate of olives is 10 barrels of oil. By comparing the opportunity cost of producing olives in the two countries, you can tell that _______ has a comparative advantage in the production of olives, and _______ has a comparative advantage in the production of oil. Suppose that Greece and Switzerland consider trading olives...
Suppose that Greece and Austria both produce oil and shoes. Greece's opportunity cost of producing a pair of shoes is 4 barrels of oil while Austria's opportunity cost of producing a pair of shoes is 9 barrels of oil By comparing the opportunity cost of producing shoes in the two countries, you can tell that has a comparative advantage in the production of shoes and has a comparative advantage in the production of oil Suppose that Greece and Austria consider...
Suppose that Greece and Germany both produce oil and cheese. Greece's opportunity cost of producing a pound of cheese is 3 barrels of oil while Germany's opportunity cost of producing a pound of cheese is 11 barrels of oil. By comparing the opportunity cost of producing cheese in the two countries, you can tell that has a comparative advantage in the has a comparative advantage in the production of oil. production of cheese and Suppose that Greece and Germany consider...
There are two oil-producing countries: A and B. Each can choose their own level of oil production: low L or high H. At low production, a country produces 2 million barrels of oil per month, while at high production, a country produces 4 million barrels of oil per month. Costs of production for A are $8 per barrel; for B, $16 per barrel The price of oil each month depends on the total output from these two countries onto the...
Protecting wood. How can we help wood surfaces resist weathering, especially when restoring historic wooden buildings? In a study of this question, researchers prepared wooden panels and then exposed them to the weather. For each of the following variables that were collected in (a)-(c), identify: i. the variable type (continuous, discrete, ordinal or nominal). Ensure that you justify your response; AND ii. the most appropriate graph to display the distribution (just mention the name of the graph). (a) Paint thickness...
There are two kinds of oil wells in most oil-producing parts of California. One kind is located on top of reservoirs of oil that are near the surface. They are owned by large oil companies. There is a second kind of well, called “wildcats.” Wildcat wells are deeper and it costs more per barrel to bring the oil to the surface than from the first kind of well. The wildcat wells are owned by smaller, independent companies. Last year, the...
Oil producing countries need to maintain the price of oil from decreasing, and for this reason they need to limit the total production of oil. Therefore, they try to maximize their profit by predicting the production level of other countries. Consider the following hypothetical situation, where Saudi Arabia and Venezuela get varying profit margins for the oil they produce. Venezuela can either produce 1M barrels per day or 2M barrels per day, while Saudi Arabia can produce 4M barrels per...