Hedging

question 60

Multiple Choice

Hedging:

• A) is a way to reduce your accounts receivable collection period.
• B) increases risk.
• C) is a non-binding agreement to buy or sell a financial futures contract.
• D) can be carried out with a futures contract.

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Definitions:

Implicit Interest Rate

This reflects the cost of borrowing, calculated from the lease terms, used to measure the present value of lease payments.

Straight-Line Depreciation

A method of allocating an asset’s cost evenly throughout its useful life.

Lease Classification Error

A lease classification error occurs when a lease is incorrectly categorized, for example, as an operating lease instead of a capital lease, potentially affecting financial statements.

Nonmonetary Liability

Obligations that do not require a cash settlement, rather possibly settled through the transfer of other non-cash assets or services.