FINA 470 Chapter Notes - Chapter 5: Financial Statement, Futures Contract, Market Risk
30 Mar 2017
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Document Summary
Intercompany investments play an increasingly larger role in business activities. Companies pursue 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 in intercompany investments: hedging activities are designed to protect the company against fluctuations in market instruments. Swaps are typically used to hedge risks such as interest rate and foreign currency risks: an option contract gives a party the right, but not an obligation, to execute a transaction. An option to purchase a security at a specified price at a future date is an example of an option contract.
