Definition: The Operating Exposure refers to the extent to which the firm’s future cash flows gets affected due to the change in the foreign exchange rates along with the price changes. In other words, a risk that firm’s revenue will be adversely affected due to the substantial change in the exchange rate and the inflation rate is called as operating exposure. Operating … [Read more...] about Operating Exposure
Transaction Exposure
Definition: The Transaction Exposure is a kind of foreign exchange risk involved in the international trade wherein the cross-currency transactions (multiple currencies) are involved. In other words, a risk faced by the company that while dealing in the international trade, the currency exchange rates may change before making the final settlement, is termed as a transaction … [Read more...] about Transaction Exposure
Foreign Exchange Exposure
Definition: Foreign Exchange Exposure refers to the risk associated with the foreign exchange rates that change frequently and can have an adverse effect on the financial transactions denominated in some foreign currency rather than the domestic currency of the company. In other words, the firm’s risk that its future cash flows get affected by the change in the value of the … [Read more...] about Foreign Exchange Exposure
Staggered Board
Definition: The Staggered Board is the board comprising of three equal classes of the board of directors who are elected on an annual basis. In other words, the staggered board is the governance practice in which certain members, generally one-third of the total board of directors are elected each year, rather than all at once. The major advantage of a staggered board over … [Read more...] about Staggered Board
Poison Pill
Definition: The Poison Pill is the anti-takeover tactic adopted by the firm to discourage a hostile takeover, by making the stock unfavorable for the corporate raider, who has given the hostile bid. Poison Pill Strategies Flip in: This strategy enables the existing shareholders of the target company to buy additional shares at a high discount rate. This poison … [Read more...] about Poison Pill
White Knight
Definition: The White Knight is any friendly investor or a company that rescues a firm from the prospects of a hostile takeover. In other words, white knight means, any company or an individual that acquires the company standing at the extremity of being taken over by the undesired forces, often called as black knights. A white knight is a savior of the company who helps in … [Read more...] about White Knight
Greenmail
Definition: The Greenmail is the anti-takeover tactic undertaken when the target firm buys back its own shares at an inflated price from the unfriendly firm which possesses a large stock of the target company and is threatening a hostile takeover. In other words, the money given by the target firm to another company, called as a corporate raider to buy back its own shares in … [Read more...] about Greenmail
Pac-Man Defense
Definition: The Pac-Man Defense is a defensive mechanism used against the hostile takeover, wherein the target firm turns around the table and acquires the firm that has made the hostile bid or has initiated the takeover. In other words, a defensive strategy in which the firm facing the threat of hostile takeover “turns the tables” by acquiring its would-be buyer. This … [Read more...] about Pac-Man Defense
National Financial Switch
Definition: The National Financial Switch is the largest interconnected network of automated teller machines (ATMs) in India. This system was developed by Institute of development and research in Banking Technology (IDRBT), Hyderabad. The national financial switch enabled the interconnectivity between the bank’s switches such that the transactions made at any ATM could be … [Read more...] about National Financial Switch
Golden Parachute
Definition: The Golden Parachute is an agreement between the company and the top executive(s), that he will be paid lucrative benefits in the event when a company is taken over by the other firm, and his employment gets terminated, as a consequence of merger or acquisition. In other words, golden parachute is a clause in the employment contract, generally of top key … [Read more...] about Golden Parachute