All of the Following Hedges Are Used for Future Purchase/sale

question 39

Multiple Choice

All of the following hedges are used for future purchase/sale transactions except

• A) Forward contracts used as a fair value hedge of a firm commitment.
• B) Options used as a fair value hedge of a firm commitment.
• C) Option contract cash flow hedge of a forecasted transaction.
• D) Forward contract cash flow hedges of a forecasted transaction.
• E) Forward contracts used to hedge a foreign currency denominated liability.

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Definitions:

Price-Earnings Ratio

A financial metric used to evaluate a company's share price relative to its earnings per share, helping investors assess the market value of a stock.

Times Interest Earned

is a financial ratio that compares a company's income before interest and taxes (EBIT) to its interest expenses, indicating how well the company can cover its interest obligations.

Debt-To-Equity Ratio

A formula displaying the relative use of debt and equity from shareholders in the financial strategy for a company's assets.

Average Collection Period

calculates the average number of days it takes for a business to receive payments from its customers for invoices issued.