posted by james on .
4.Why is acceleration or delay of payments more useful to an IC than to smaller, separate companies?
i was able to answer all but this question. i have read the material required but i don't quite get what they are asking?
never mind i think i found it....
If an importer expects the currency in its country
to depreciate in terms of the currency of its foreign supplier, it probably will be motivated to
buy the necessary foreign currency as soon as it can. This assumes the importer must pay in
the currency of the exporter, the opposite of our assumption in the hedging discussions.
Because an IC has more flexibility to hold out for longer periods of time to finalize the transaction. The IC can negotiate forward hedge contracts with its bank for any currency, because the company and the bank are not limited to the 1-, 3-, and 6-month periods instead, they can agree on any time period, whereas, smaller companies cannot afford to wait this long.
this helped me understand thanks