Which of the Following Hedging Strategies Would a Business Most

question 43

Multiple Choice

Which of the following hedging strategies would a business most likely use?

• A)An importer will want to hedge his foreign denominated accounts receivable and will purchase forward contracts to hedge an exposed net asset position.
• B)An importer will want to hedge his foreign denominated accounts payable and will purchase forward contracts to hedge an exposed net liability position.
• C)An exporter will want to hedge his foreign denominated accounts receivable and will purchase forward contracts to hedge an exposed net liability position.
• D)An exporter will want to hedge his foreign denominated accounts payable and will purchase forward contracts to hedge an exposed net liability position.

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Definitions:

Inventory

Assets that are held for sale in the ordinary course of business, or in the process of being produced for such sale, or in the form of materials to be consumed in the production process.

Sole Proprietor

An individual who owns and operates a business by themselves, without forming a corporation or a partnership, bearing full responsibility for the business's debts and obligations.

Schedule C

A form used by self-employed individuals or sole proprietors to report their business income and expenses to the IRS.

Ordinary Gain

Ordinary gain refers to the profit that arises from the sale of an asset or property, which is taxable at standard income tax rates.