AMBARELLA INC 10-Q

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk As of October 31, 2020 and January 31, 2020, we had cash, cash equivalents and marketable debt securities totaling $423.6 million and $404.7 million, respectively. Our cash is deposited in checking accounts with reputable financial institutions. The cash equivalents and marketable debt securities consist primarily of investments in money market funds, asset-backed securities, commercial paper, U.S. government securities, and debt securities of corporations . Our cash is held for working capital purposes. We do not enter into investments for trading or speculative purposes. Interest Rate Fluctuation Risk The primary objectives of our investment activities are to preserve capital, provide liquidity and maximize income without significantly increasing risk. Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest rates may affect the interest income on our cash, cash equivalents and marketable debt securities, and the market value of those securities . To minimize this risk, we maintain our portfolio in a variety of debt securities with high liquidity and low credit risk. We do not enter into investments for trading or speculative purposes. A 10% change in interest rates will not have a material impact on our future interest income or investment fair value. The liquidity risk and the risk associated with fluctuating interest rates are limited to our investment portfolio. Foreign Currency Risk To date, all of our product sales and inventory purchases have been denominated in U.S. dollars. We therefore have not had any foreign currency risk associated with these two activities. The functional currency of all of our entities is the U.S. dollar. Our operations outside of the United States incur operating expenses and hold assets and liabilities denominated in foreign currencies, principally the New Taiwan Dollar and the Chinese Yuan Renminbi. Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly with respect to a strengthening of the U.S. dollar. As we grow our operations, our exposure to foreign currency risk could become more significant. To date, we have not entered into any foreign currency exchange contracts and currently do not expect to enter into foreign currency exchange contracts for trading or speculative purposes.