week 2 course project

ACCT 540 Week 2 Course Project

Thomas Foods has requested that I design a hedging strategy for them in order to alleviate the risks of price increases from their suppliers. The company purchases produce from farmers and then distributes the produce to local grocery stores. For Thomas Foods, the problem we are trying to solve is which hedging strategies can be implemented in order to insulate the company’s operating income. Throughout the research process, we should assume that Thomas Foods is in good financial standing, and will be able to afford the costs associated with implementing a hedging strategy. Some key research questions that should be asked when trying to establish a hedging strategy is how loyal the farmers have been to Thomas Foods in the past, and if Thomas food has been able to identify any trends in price fluctuations on the farmers’ produce over the years. In addition, it is noted in the case that the Controller of the company is unfamiliar with the accounting treatments that deal with hedging strategies. For this reason, another key question to keep in mind while researching is: how can I present the hedging strategies and the affect that they will have on the company’s financial statements in a way that is sufficient, concise and easy for the controller to understand?