In a Derivative Transaction

question 92

Multiple Choice

In a derivative transaction:

• A) the dollar amount of the transaction increases as the contract date approaches.
• B) the risk is less than if actually purchasing the underlying asset.
• C) what one person gains is what the other person loses.
• D) there is always a futures contract.

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Definitions:

Days' Sales

A financial metric that calculates the average time it takes for a company to convert its inventory into sales.

Receivables Ratio

The Receivables Ratio, also known as the Accounts Receivable Turnover Ratio, measures how efficiently a company collects cash from its customers by comparing sales to the average receivables.

Outstanding Accounts

Accounts or invoices that have been billed but not yet paid by customers.

EBIT

Earnings Before Interest and Taxes, a financial metric indicating a company's operating profitability by excluding interest and taxes from earnings.