Describe a Balance Sheet Hedge and Give at Least Two

question 4

Essay

Describe a balance sheet hedge and give at least two examples of when such a hedge could be justified.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may not be collectible.

Allowance for Doubtful Accounts

A contra-asset account that represents the estimated portion of accounts receivable that may not be collectible.

Uncollectible Receivables

Amounts due from customers that are considered unlikely to be collected and are written off as a loss.

Bad Debt Expense

The expenses linked to the accounts receivable that a business cannot recover.