What does the term hedging mean? Why do companies elect to follow this strategy?
Answer to relevant QuestionsHow does the timing of hedges of (a) foreign currency denominated assets and liabilities, (b) foreign currency firm commitments, and (c) forecasted foreign currency transactions differ?What are the differences in accounting for a forward contract used as a cash flow hedge of (a) a foreign currency denominated asset or liability and (b) a forecasted foreign currency transaction?1. Lawrence Company ordered parts costing FC100,000 from a foreign supplier on May 12 when the spot rate was $0.20 per FC. A one-month forward contract was signed on that date to purchase FC100,000 at a forward rate of ...On December 20, 2011, Butanta Company (a U.S. company headquartered in Miami, Florida) sold parts to a foreign customer at a price of 50,000 ostras. Payment is received on January 10, 2012. Currency exchange rates for 1 ...On June 1, Alexander Corporation sold goods to a foreign customer at a price of 1,000,000 pesos. It will receive payment in three months on September 1. On June 1, Alexander acquired an option to sell 1,000,000 pesos in ...
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