Which of the Below Statements Is TRUE

question 3

Multiple Choice

Which of the below statements is TRUE?

• A) Futures contracts are marked to market at the end of most trading days.
• B) A forward contract may or may not be marked to market, depending on the wishes of the two parties.
• C) For a forward contract that is not marked to market, there are interim cash flow effects because no additional margin is required.
• D) The parties in a forward contract are not exposed to credit risk because either party may not default on the obligation.

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Definitions:

Ordering Costs

Expenses incurred in placing and receiving orders from suppliers, typically including costs related to processing, shipping, and receiving.

Inventory Held

The goods and materials that a business has in stock and available to sell at a given time.

Credit Policy

The guidelines a company follows to determine the amount and terms of credit to extend to customers.

ACP

Average Collection Period, a metric that measures the average number of days it takes for a company to collect its accounts receivable.