The Key Criterion for Qualifying as a Hedge Is That

question 20

Multiple Choice

The key criterion for qualifying as a hedge is that the hedging relationship:

• A)Must be highly effective in achieving offsetting changes in fair values or cash flows.
• B)Must have predictable results.
• C)Must have fixed outcomes.
• D)None of these.

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Definitions:

Net Operating Income

Income originating from a corporation's central business endeavors, excluding subtractions for interest and taxes.

Variable Component

A portion of a cost or expense that varies directly with changes in production volume, business activity, or other variables.

Least-Squares Regression

A statistical method used to determine a line of best fit by minimizing the sum of the squares of the differences between observed values and those predicted by the model.

Inspection Cost

Expenses associated with the activities necessary to ensure that products or services meet the required standards and specifications.