Explain the Differences Between Hedging Transactions Exposure and Hedging Economic

question 170

Essay

Explain the differences between hedging transactions exposure and hedging economic exposure

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Definitions:

Unearned Rent

Income received by a landlord for rent that has been paid in advance, but which covers a period that has not yet occurred, and is recorded as a liability.

Net Income

The total profit of a company after all expenses are deducted from revenues, also known as the bottom line.

Understated

Described or represented as less than is actually the case; downplayed in expression or estimation.

Systematic Allocation

The process of distributing an expense or income in a methodical way over a certain period or among various accounts.