What happens to a US company if foreign currency depreciates?

When foreign currency depreciates relative to the US dollar, it means that the value of that currency has decreased compared to the dollar. For a US company that operates internationally or relies on foreign sales, this depreciation can have a direct impact on profitability.

If a US company sales products or services in a foreign market and prices those goods in the local currency, a depreciation of that foreign currency means that when the company converts its revenue back to US dollars, it will receive less than it would have prior to the depreciation. This results in a smaller profit in US dollar terms because the earnings from that foreign sales will translate into fewer dollars.

Thus, a depreciated foreign currency essentially erodes the revenue that the US company receives from its international operations, leading to a smaller profit when all conversions are made. This relationship highlights the importance of currency exchange rates in international business operations.