Hedging Transaction Exposure with Option Contracts Allows the Firm to Benefit

question 48

True/False

Hedging transaction exposure with option contracts allows the firm to benefit if exchange rates are favorable but protects the firm if exchange rates turn unfavorable.

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Definitions:

Credit Card

A credit card is a payment card issued by financial institutions that allows cardholders to borrow funds within an agreed limit for purchases or cash advances.

Journal Entry

A journal entry is a record in accounting that logs a transaction in the financial statements of a business.

Allowance Method

An accounting technique used to account for bad debts by estimating uncollectible accounts at the end of each period.

Allowance for Doubtful Accounts

A contra asset account used to estimate the portion of a company's accounts receivable that may not be collected.