As a result, these companies maintain foreign currency trading desks to hedge the transaction risk that they face as a consequence of such dealings (Myers, 2010).

In order to address its foreign currency transaction risk, some firms prefer to finance locally. McDonald's, for example, has a number of strategies that it uses to hedge its exposure to transaction risk. The company prefers, where possible, to finance locally and to purchase its supplies locally as well. This allows it to keep revenue in foreign countries, reducing the overall amount of transaction risk that it faces with such operating hedges. As a result, approximately 40% of the company's debt is denominated in foreign currencies, primarily the pound, euro, and the Australian and Canadian dollars. While this strategy still leaves McDonald's exposed to translation risk, it greatly reduces the firm's total transaction risk, because it reduces the overall percentage of transactions that involve...
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