Hedging Translation Exposure with Forward Contracts Can Backfire If the Currency

question 37

True/False

Hedging translation exposure with forward contracts can backfire if the currency being hedged depreciates.

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Definitions:

Investing Activities

Refers to the purchasing and selling of long-term assets and other investments, not including cash equivalents, which are reported in a company's cash flow statement.

Indirect Method

A cash flow statement approach that adjusts net income for the effects of non-cash transactions and changes in working capital to calculate cash from operating activities.

Accumulated Depreciation

The cumulative total of depreciation costs noted for an asset since it was acquired.

Original Cost

The initial purchase price or acquisition cost of an asset or investment.