The Importance Of Sustaining And Improving Company'S Business Success By Using Indicator Of The Degree Of Hedging Necessity

Ivo Speranda

Montenegrin Journal of Economics, 2013, vol. 9, issue 4, 21-38

Abstract: This paper considers influence of hedging regarded as a technique for protecting companies against unforeseeable events which might seriously influence company's business, primarily its financial stability and its business results The econometric model is thus created to test the impact of hedging on companies' EBIT and to determine the necessity of hedging usage. Regression method and model were used to assess the impact of change in dollar and kunai exchange rates in relation to EBIT measure in 10 year period. Additionally the completely new analytic tool named Indicator of the degree of hedging necessity IZI has been introduced This paper shows huge efficacy of hedging as a protection tool, firstly evident through positive effects on EBIT and therefore on the company and the entire economy's improved competitiveness degree. In this paper the completely new indicator has been introduced and explained in order to assess the necessity of cash flow protection. Finally, it's obvious that hedging as a tool of protection, contributes a lot in achieving better operational and financial goals which leads to a higher degree of the company's competitiveness on the international market.

Date: 2013
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