Question 1

**Section B - Case 1: Verdant Yields Co**

*Scenario:* Verdant Yields Co is an organic avocado exporter. The business is highly seasonal. Annual credit sales are $18,250,000. The current trade receivables balance is $3,000,000. Assume a 365-day year.

**Question 5:** Verdant Yields expects to receive a large payment in Euros in three months. The treasury team believes the Euro will depreciate against their home currency over this period.

Which internal hedging technique should Verdant Yields attempt to negotiate with the customer?

Accepted Answer

Identify that the question asks for an *internal* hedging technique. If the foreign currency you are going to receive is losing value, do you want it sooner or later?

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Choosing a forward contract (Option C) because it is a valid hedge, missing the word 'internal' in the question prompt.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FM — Financial Management Practice Exam 5

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