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The practice of delaying receipts from the foreign currency designated receivables whose currencies are likely to appreciate and delaying foreign currency designated payables whose currencies are likely to depreciate is known as:

The practice of delaying receipts from the foreign currency designated receivables whose currencies are likely to appreciate and delaying foreign currency designated payables whose currencies are likely to depreciate is known as: Correct Answer Lagging

The correct answer is Lagging

Key Points 

  •  Leads and lags in international business usually refer to the deliberate acceleration or delaying of payments due in a foreign currency in order to take advantage of an expected change in currency exchange rates.
  •  A strengthening of the currency being paid out would lead to a smaller payout for the entity in question, while a weakening of the currency would lead to increased costs the longer the payment was delayed.
  • A corporation or government can control the schedule of payments received or made, within reasonable limits.
  • When a payment to a foreign entity is involved, the organization may opt to pay earlier or later than scheduled.
  • These changes would be made in anticipation of capturing the benefit from a change in currency exchange rates.

Additional Information Netting- Netting includes offsetting the value of multiple positions or payments due to be exchanged between two or more parties. It can be used to determine which party is owed remuneration in a multiparty agreement. Netting is a general concept that has a number of more specific uses, including in the financial markets.

Risk Hedging- Hedging is a risk management strategy employed to offset losses in investments by taking an opposite position in a related asset. The reduction in risk provided by hedging also typically results in a reduction in potential profits. Hedging requires one to pay money for the protection it provides, known as the premium.

Hence, the correct answer is Lagging.

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