What Are Foreign Exchange Earnings?

••• Image by Flickr.com, courtesy of Rene Ehrhardt

Thousands of companies around the world provide their products and services to hundreds of millions of customers in almost every country on the globe, thereby generating earnings in foreign currency denominations. These types of earnings account for the majority of business for some large multinational companies.

History

Foreign exchange earnings are as old as foreign travel and commerce. Early explorers arriving in America had to barter goods in exchange for food and other items of value to the native population. Now, international businesses provide goods and services in foreign countries for payment in native currency units.

Significance

Foreign exchange earnings rank as one of the most important factors in the profitability of many medium and large enterprises. Many multinational corporations earn more abroad than in their domestic markets.

Geography

Some international firms have operations in almost every country on the globe, generating revenue in dozens of different foreign currencies.

Size

Foreign exchange earnings account for more than half of the profits of numerous large companies like Coca Cola, McDonald's and Pepsi.

Advantages

The primary advantage of foreign exchange earnings is diversity of income. Companies that earn a great deal from foreign markets are not exclusively dependent on their home turf, and have an expanded array of opportunities relative to their competitors.

References

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Photo Credits

  • Image by Flickr.com, courtesy of Rene Ehrhardt