1/Nov/2008 , Saturday
When the dollar was relatively weak, companies that do a lot of business abroad - Cola Cola, 3M and Philip Morris International, to name a few - saw profits increase when converted from foreign currencies into U.S. dollars.
The benefits of foreign exchange, which many companies would rather downplay, have been tremendous in recent months. Tobacco maker Philip Morris made more than half of its 17.5% sales growth last quarter from changing money. Merck posted a 2.1% decline in sales; without foreign exchange, revenues at the pharmaceuticals maker would have decreases nearly three times as much.
But currency hedging is a tricky business: Companies use derivative financial instruments such as option contracts and currency forwards to try to counterbalance the risk they incur from selling abroad.
