To Hedge a Foreign Currency Receivable

question 91

Multiple Choice

To hedge a foreign currency receivable,

• A)buy call options on the foreign currency with a strike in the domestic currency.
• B)buy put options on the foreign currency with a strike in the domestic currency.
• C)sell call options on the foreign currency with a strike in the domestic currency.
• D)sell put options on the foreign currency with a strike in the domestic currency.

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Definitions:

GAAP

Generally Accepted Accounting Principles, a collection of commonly-followed accounting rules and standards for financial reporting.

IFRS

A collection of accounting standards crafted by the International Accounting Standards Board to be utilized worldwide, known as International Financial Reporting Standards.

Inventory Write-Downs

Reductions in the book value of inventory that occur when the market value drops below the cost recorded on the financial statements.

Financial Reporting Philosophy

A set of underlying principles and guidelines that dictate how financial statements are prepared and presented, aiming to provide accurate, transparent, and comprehensive financial information to users.