Finance. The most important financial issue in international business is managing exchange rates. When the euro was first introduced in 1999, it was worth $1.17. By 2002, the euro had hit a low of...

Finance. The most important financial issue in international business is managing exchange rates. When the euro was first introduced in 1999, it was worth $1.17. By 2002, the euro had hit a low of $.82, making European exports to the United States more attractive to U.S. consumers. However, fortunes change and by 2006, the euro had increased in value to $1.26, reducing the cost competitiveness of European manufacturers. Individual transactions are subject to exchange rate fluctuations. For instance, a contract to source mechanical parts from a German supplier denominated in euros cost a U.S. buyer 57 percent more in dollars in 2004 than 2 years earlier. A hedging strategy can reduce a firm’s exposure to exchange rate risk. Taxation is another financial issue that merits attention and expert assistance.