Calculating Total Revenue (various currencies)
Hey everyone, I am not sure if this is the right forum for this post but my question is the following:
I am studying a company that has the following Revenues (in various currencies) for 2019: EUR 150 million USD 100 million GBP 10 million AUD 10 million
How do I calculate the Total Revenue for the year, let's say in USD? Do I pick the 2019 end-of-year exchange rates? Or average exchange rates for 2019? [I am doing the calculation today.] I am looking for the way that is mostly used in practice.
Any input is welcome. Thanks!
George
P.S. Please let me know if I need to move this post to a different forum.
I'm not completely sure, but if this is in the context of a DCF, then maybe use the exchange rate that matches the point in time that you're assuming those revenues are coming in. So, by default, we're assuming all revenues and cash flows are coming year end, so maybe use the year-end exchange rate.
Makes sense. That was my initial feeling as well. Though it all depends on a single day's exchange rate and is not smoothed out for how the exchange rate was changing throughout the year.
You will use weighted average (accountant will do this in consolidated accounts). From there you forecast with foreward rates and use the risk free rate of your functional (reporting) currency.
Thanks for the input. However, what weighted average are you referring to? I suppose I would have to convert the EUR, GBP, AUD revenue into USD using some exchange rate and then add it all up in USD and then that's the 2019 revenue. Where does the "weighted average" come in?
Forecasting with forward rates makes sense. As well as using the US RFR if I am doing a DCF in USD.
Weighed as in if you receive 50% of cashflow on 15 Jan and 50% on 4 Nov, u take 50% of 15Jan exchange rate and 50% of 4 Nov.
I guess his issue is that he doesn't have access to the seasonality of the cashflow. Ie private-co only reporting end year numbers.
True - I got Rover's point though.
My guess and take on this if you wanted to be extra conservative: you take the minimum of the exchange rate during that period. Should provide a floor value to your earnings until you get more information.
Similique veniam et aut quia non laborum. Molestiae soluta nisi blanditiis dolorem suscipit id delectus. Quia velit voluptas perspiciatis est error itaque. Aut sit asperiores eos voluptas et ut molestias. Voluptatum qui est impedit minima eum natus aliquid.
Quod veniam dolores repudiandae ad fugit omnis cum dicta. Ipsam sint vitae quibusdam dolorem provident odit. Facilis dolores ad officiis delectus aut velit. Qui laborum aliquam dolorem sunt cupiditate ab. Nemo deleniti ipsa libero culpa hic et accusantium.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...