I Am Trying To Understand A Currency Question? Our Manufacturer Gives Us Prices In Swiss Francs We Send Our PO's To Them In Swiss Francs We Receive The Goods In Swiss Francs We Buy Swiss Francs From The Back At The Current Rate We Pay The Invoice In Swiss Francs. So My Question Is Why Does The Manufacturer Gives Us A USD To CHF (swiss Franc) Conversion Rate ? They Change The Rate On A Yearly Basis. I Am Working On Setting Up A New Accounting System And I Can't Figure Out Where The Conversion Rate Comes In From The Manufacturer. I Have Gotten Conflicting Information From Different People From Within The Company And I Am Really Trying To Understand This Concept. If It Matters They Also Give Us The List Price In Swiss Francs And We Set Our On USD List Price. Thanks For Any Help

To answer your question: "Why Does The Manufacturer Gives Us A USD To CHF (Swiss Franc) Conversion Rate ?", my guess is that they do it to help you to understand and predict your costs. They want you to see your costs in SFr and USD and be able to use that to calculate your profitability from their products.

But the more important question is "why do they change the rate only once per year?" The fact that they only change the rate once a year, gives your company pricing stability. This allows your company to set its pricing for the year and not have to change it on a daily or weekly basis as exchange rates change.

For example, as you probably know, in the past months, the USD has been rapidly dropping. This is making the products that your company buys from Switzerland MUCH more expensive. Right now your manufacturer is absorbing that cost by holding the exchange rate steady for the year. When he does his annual exchange rate adjustment, your company will probably have to have a large increase in the list price in order to continue to make a reasonable profit. Now, imagine if your manufacturer did not hold the exchange rate constant for the year. As the dollar drops, your company may be making a loss with every item that they sell. Of course, this will be the opposite when (and if) the dollar resumes its strength.

In order to check the manufacturers exchange rate, you can use some online converters..

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