Chapter 5 Homework solutions

Chapter 5 Homework solutions - Chapter 5 REVIEW...

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Chapter 5 REVIEW Intercompany investments play an increasingly larger role in business activities. Companies pursue intercompany activities for several reasons including diversification, expansion, and competitive opportunities and returns. This chapter considers our analysis and interpretation of these intercompany activities as reflected in financial statements. We consider current reporting requirements from our analysis perspective--both for what they do and do not tell us. We describe how current disclosures are relevant for our analysis, and how we might usefully apply analytical adjustments to these disclosures to improve our analysis. We direct special attention to the unrecorded assets and liabilities in intercompany investments. 5. Hedging activities are designed to protect the company against fluctuations in market instruments. Speculative activities seek to profit on fluctuations in market instruments. 6. A futures contract is an agreement between two or more parties to purchase or sell a certain commodity or financial asset at a future date and at a definite price. 7. A swap contract is an arrangement between two or more parties to exchange future cash flows. Swaps are typically used to hedge risks such as interest rate
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This note was uploaded on 07/02/2011 for the course FINA 470 taught by Professor Austin during the Spring '11 term at South Carolina.

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Chapter 5 Homework solutions - Chapter 5 REVIEW...

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