Futures Contracts Avoid the Difficulties of Forward Contracts By

question 53

Multiple Choice

Futures contracts avoid the difficulties of forward contracts by:

• A) efficiently linking buyers and sellers.
• B) controlling the price of the commodity being traded.
• C) allowing speculators to make a profit on futures contracts.
• D) covering any losses incurred by buyers and sellers on the contract.

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Definitions:

Net Operating Income

The profit derived from a company's regular business operations, excluding deductions for interest and taxes.

Variable Costing

An approach in accounting where only direct materials, direct labor, and variable manufacturing overhead costs are considered in calculating the cost of products.

Net Operating Income

The total profit of a company after operating expenses are deducted, but before interests and taxes are subtracted.

Fixed Cost

Costs that do not change with the level of production or sales activity, such as rent or salaries.