Many Firms Use Derivative Instruments to Hedge Exposure to Changes

question 38

Essay

Many firms use derivative instruments to hedge exposure to changes in the fair value of an asset or liability,or to hedge exposure to variability in expected future cash flows.As an analyst examining the financial reports of a company that uses derivative instruments to hedge,what questions should you ask when thinking about derivatives and accounting quality?

---

Definitions:

Material

A substance or substances from which a thing is or can be made.

Kente Cloth

A traditional Ghanaian textile made of interwoven cloth strips, highly symbolic and often worn for special occasions with specific meanings tied to its colors and patterns.

Produced

Created, manufactured, or brought into existence through a process.

Akan Kente Cloth

A type of silk and cotton fabric made of interwoven cloth strips and is native to the Akan ethnic group of Ghana, known for its colorful patterns and symbolic meanings.