What Is Hedging

question 77

Multiple Choice

What is hedging?

• A) It is a method of leveraging returns when a company has foreign currency receivables or payables or has outstanding commitments that will be affected by changes in market prices.
• B) It is a system for investing in financial instruments such that the entity is guaranteed increased returns and lower risks.
• C) It is any activity, entered into by the entity, designed to increase returns and reduce risk.
• D) It is an action taken with the object of avoiding or minimising possible adverse effects of movements in things such as exchange rates or market prices.

Know the last items to be reported on the statement of cash flows.

Understand the utility of the statement of cash flows in financial analysis.

Classify different types of cash flows correctly on the statement of cash flows.

Understand the calculation of net cash flow from operating activities using the indirect method.

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Definitions:

Competitive Output Markets

Markets where multiple firms sell similar or identical products, and prices are determined through competition among sellers.

Exponent

In mathematics, a number indicating how many times a base is to be multiplied by itself.

Binomial

A polynomial expression that contains exactly two terms, typically written in the form a+b.

Simplify

To make an expression less complex by combining like terms and executing arithmetic operations where possible.