ACCA Strategic Professional · Advanced Financial Management · The role of the treasury function in multinationals
Zeta Co, a UK company, expects to receive US$2.4m in three months and must pay US$1.9m in three months to a supplier. It plans to use matching. What exposure remains to be hedged by another method, and in which direction?
The remaining exposure is a net US$0.5m receivable. Matching offsets the US$1.9m payable against the US$2.4m receivable due at the same time, leaving only the difference exposed to exchange rate movements, which can then be hedged with a forward or option.
- AUS$4.3m net payable
- BUS$0.5m net receivableCorrect
- CUS$0.5m net payable
- DUS$2.4m net receivable
Explanation
Matching offsets US$ receipts against US$ payments with the same timing: 2.4m receivable minus 1.9m payable leaves US$0.5m receivable. Adding the amounts (4.3m) is the sign error, and the receivable is larger so the net is not a payable.
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