Which of the Following Statements Is True Concerning Forward Contracts

question 40

Multiple Choice

Which of the following statements is true concerning forward contracts classified as hedges of an identifiable foreign currency commitment?

• A) Forward contracts used as hedges cannot exceed the foreign currency commitment.
• B) Forward contracts cannot extend for a time period after the transaction date of the commitment.
• C) The gain or loss traceable to the time period after the transaction date of the commitment should not be deferred.
• D) None of these statements is true.

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Definitions:

Capital Structure

A company's use of both borrowed money and stocks to finance its ongoing operations and grow.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business.

Capital Structure

The fusion of equity and debt resources a firm applies to underwrite its operational needs and scalability.

Working Capital Decision

The process of managing the short-term assets and liabilities of a firm to ensure it operates efficiently and can meet its obligations.