Audiovox 2005 Annual Report Download - page 44

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ITEM 7A−QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in our market instruments and positions is the
potential loss arising from adverse changes in marketable equity security
prices, interest rates and foreign currency exchange rates.
Marketable Securities
Marketable securities at November 30, 2005, which are recorded at fair
value of $11,998, include a unrealized loss of $1,106, and have exposure to
price risk. This risk is estimated as the potential loss in fair value resulting
from a hypothetical 10% adverse change in prices quoted by stock exchanges and
amounts to $1,200 as of November 30, 2005. Actual results may differ.
Interest Rate Risk
Our earnings and cash flows are subject to fluctuations due to changes in
interest rates on investment of available cash balances in money market funds
and investment grade corporate and U.S. government securities. Under our current
policies, we do not use interest rate derivative instruments to manage exposure
to interest rate changes. In addition, our bank loans expose us to changes in
short−term interest rates since interest rates on the underlying obligations are
either variable or fixed.
Foreign Exchange Risk
We are subject to risk from changes in foreign exchange rates for our
subsidiaries and marketable securities that use a foreign currency as their
functional currency and are translated into U.S. dollars. These changes result
in cumulative translation adjustments, which are included in accumulated other
comprehensive loss. At November 30, 2005 we had translation exposure to various
foreign currencies with the most significant being the Euro, Thailand baht and
Canadian dollar. The potential loss resulting from a hypothetical 10% adverse
change in quoted foreign currency exchange rates, as of November 30, 2005
amounts to $3,179. Actual results may differ.
ITEM 8−CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item appears beginning on page F−1 of this
Annual Report on Form 10−K and is incorporated herein by reference.
ITEM 9−CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not Applicable
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