A Forward Contract Used as a Cash Flow Hedge Will

question 1

Multiple Choice

A forward contract used as a cash flow hedge will be recorded as an asset if

• A)the holder is expecting to receive a payment as a result of the contract.
• B)the holder is accounting for the hedged instrument as a fair value hedge.
• C)the holder is hedging the net investment in a foreign entity.
• D)the holder is using the alternate accounting method and deferring all gains or losses from the hedge.

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Definitions:

Cash Dividends

Cash distributions from a company to its shareholders, usually derived from earnings.

Treasury Stock

Treasury stock consists of shares that were issued and later reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Dividend Yield

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price, providing insight into the income generated from an investment.

Cash Dividends

Payments made by a corporation to its shareholders, typically from profits, in the form of cash.