If a Trader Holding a Long Position in Corn Futures

question 7

Multiple Choice

If a trader holding a long position in corn futures fails to meet the obligations of a futures contract, the party that is hurt by the failure is

• A)the offsetting short trader.
• B)the corn farmer.
• C)the clearinghouse.
• D)the broker.

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Definitions:

FIFO Method

An inventory valuation method where the first items placed in inventory are the first sold, standing for First-In, First-Out.

Average-Cost Method

An inventory valuation method that determines the cost of goods sold and ending inventory value by computing the average cost of all similar items.

Ending Inventory

The value of goods available for sale at the end of an accounting period, after accounting for purchases and sales.

Merchandise Inventory

Merchandise inventory refers to the goods available for sale to customers, which are considered current assets on a company's balance sheet.