If a Financial Manager with an Interest Liability on a Future

question 44

Multiple Choice

If a financial manager with an interest liability on a future date were to sell Futures and interest rates end up going up, the position outcome would be:

• A) Futures price falls; short earns a profit.
• B) Futures price rises; short earns a loss.
• C) Future price falls; long earns a loss.
• D) Futures price rises; long earns a profit.

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Definitions:

Cash Cycle

The amount of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

Cash Disbursement

Cash disbursement refers to the payment of money by a business to settle obligations, including operating expenses, investments, and financing activities.

Cash Collection

The process of receiving cash payments from customers, typically related to sales or services provided.

Trust Receipts

Documents that acknowledge the receipt of goods but allow the buyer to sell or process the goods before payment is made to the seller.