What Is Hedging? A. It Is a Method of Leveraging Returns When a Returns

question 60

True/False

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.
E. None of the given answers.

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Definitions:

Partnership Dissolution

The process of terminating the legal and formal relationships between all partners in a partnership, leading to the cessation of business operations under the partnership structure.

Capital Deficiency

A situation where a company's liabilities exceed its assets, indicating that it does not have enough capital to meet its financial obligations.

Credit Balances

Represent amounts owed to creditors or customers, typically seen in liability, equity, and revenue accounts.

Income Sharing

An arrangement where income is distributed among participants or stakeholders based on predetermined criteria, often found in partnerships, cooperatives, and certain employment agreements.