28 Nov
Forex Netting | Money Market Hedge | CA Final SFM
Purchased Assets on 01.07.2011 for $ 1,00,000
Amount to be settled on 30.09.2011
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There is a “$” Liability
Coincidentally, the company has a receivable of $1,00,000 due on 30.09.2011.
The company will collect $ 1,00,000 from its receivable on 30.09.2011 and use the same to pay-off its “$” liability.
The company does not have any risk of exchange rate fluctuation
In reality, such coincidence may not take place always.
However, with “Money Market” operations the same can be created.
If the company has “$” liability, it has a need to create a corresponding “$”Asset.
If the company has “$”Asset, it has a need to create a corresponding “$” liability.
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