From its 10K we can see that globally HPQ has its operationsspread out in the following geographies: Americas, Europe, Asia pacific andJapan.
From figure 4.5 we see, 63percent of its $48.24 billion in net sales comes from international operationsand domestic sales account for 37 percent of HPQ’s net sales. Similar to AAPL, HPQ benefits from a weaker U.
S.dollar and is also adversely affected by a stronger U.S. dollar relative to theforeign currency. HPQ transacts business in approximately forty-four currenciesworldwide. However in its 10K it lists the following most significant foreigncurrencies impacting HPQ’s operations: European Dollar (EUR), Great BritainPound (GBP), Chinese Yuan (CNY), Japanese Yen (JPY) and Indian Rupee (INR).From figure 4.2 and figure 4.
6 we gather that EUR which stands stern at $1 for €0.861 andGBP which stands at $1 for £0.76 are the only two currencies which pose a levelof risk to the operations of HPQ.
HPQ uses U.S. dollar as its functional currency. Fromthe 10K we see that HPQ is exposed to foreign currency exchange rate risk inherentin its sales commitments, anticipated sales, anticipated purchases and assetsand liabilities denominated in currencies other than the U.S. dollar. HPQ use acombination of forward contracts and at times, options designated as cash flowhedges to protect against the foreign currency exchange rate risks inherent inour forecasted net revenue and, to a lesser extent, cost of sales andintercompany loans denominated in currencies other than the U.S.
dollar. Inaddition, when debt is denominated in a foreign currency, the company usesswaps to exchange the foreign currency principal and interest obligations forU.S.
dollar-denominated amounts to manage the exposure to changes in foreigncurrency exchange rates. In figure 4.7 we see the forward and optionscontract entered by HPQ in 2016 and 2015 to offset exchange rate risk. From the10K document we understand that HPQ’s foreign currency cash flow hedges maturegenerally within twelve months. However, its hedges related to longer termprocurement arrangements do extend several years and forward contractsassociated with intercompany loans extend for the duration of the lease or loanterm, which typically range from two to five years.1Currency Ratewww.reuters.com/finance/currencies