An Entity Holding Both Financial Assets and Liabilities Is Allowed

question 21

Multiple Choice

An entity holding both financial assets and liabilities is allowed to offset and determine fair value on the net position as long as:
I they hold a net long position
II they hold a net short position
III they have a documented risk management strategy
IV the manage the group of net financial assets and liabilities on a net exposure basis
v.transactions are conducted in an orderly market

• A)I and III
• B)II and IV
• C)III and IV
• D)II and V

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Definitions:

ABC Analysis

A method of categorizing inventory into three classes (A, B, and C) based on their importance, with A being the most valuable and C being the least.

Dollar Volume

Refers to the total amount of money exchanged in transactions for a particular commodity within a specific timeframe.

Pareto Principle

The principle that states a small percentage of causes (roughly 20%) often lead to a large percentage of effects (approximately 80%).

ABC Analysis

A method of classifying inventory items into categories based on their importance, such as value or turnover rate, to optimize inventory management.