Why Do Companies and Billionaires Lose Money? How Does This Happen?

If you’re a billionaire, or if you’re a multi-billion dollar company, chances are that you operate in multiple countries. When you operate in multiple countries, you have to deal with the change of currency, which is in a market of its own called the foreign exchange. When currency loses value in the country where you do business, you take a loss on earnings.

Example: British pound is rated 1.5 compared to a dollar USD. If your business sells millions of dollars of services in Britain and one day the pound is worth 1 compared 1 dollar, then you just took a significant loss of about 33% of your income in that country, over something you have no control over.

So even if everything goes right, you are not in full control of everything. You’re codependent on the success of the currency in the countries of which you operate.

Originally posted on Quora.

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