Which of the Following Is True About Profits from Futures

question 25

Multiple Choice

Which of the following is true about profits from futures contracts?

• A) The person with the long position gets to decide whether to exercise the futures contract and will only do so if there is a profit to be made.
• B) It is possible for both the holder of the long position and the holder of the short position to earn a profit.
• C) The clearinghouse makes most of the profit.
• D) The amount that the holder of the long position gains must equal the amount that the holder of the short position loses.
• E) Holders of short positions can recognize profits by making delivery early.

Comprehend the implications of cost flow assumptions on the valuation of ending inventory and cost of goods sold.

Determine the effects of inventory valuation methods on financial ratios and business decision-making.

Grasp the conceptual basis and application of the retail inventory method and its estimation techniques.

Understand the application and impact of the lower of cost or market rule on inventory valuation.

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