chapter 3 # 11 1. Revenue at a major cellular telephone manufacturer was $1.4 bi

Question

chapter 3 # 11 1. Revenue at a major cellular telephone manufacturer was $1.4 billion for the nine months ending March 2, up 97 percent over revenues for the same period last year. Management attributes the increase in revenues to a 137 percent Increase in shipments, despite a 17 percent drop In (lie average blended selling Price of Its line of phones. Given this Information, is It surprising that the company?s revenue Increased when It decreased the average selling price of its phones? Explain.

Explanation / Answer

Market risk is the risk of price changes that affects any firm that trades assets and liabilities. The risk can surface because of changes in interest rates, exchange rates, or any other prices of financial assets that are traded rather than held on the balance sheet. Market risk can be minimized by using appropriate hedging techniques such as futures, options, and swaps, and by implementing controls that limit the amount of exposure taken by market makers.

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