A Producer That Is Worried About the Future Price That

question 98

Multiple Choice

A producer that is worried about the future price that will be available when its product is to be sold can best hedge this price risk by:

• A) buying a futures contract.
• B) selling a futures contract.
• C) buying a call option.
• D)selling a call option.

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Definitions:

Uncollectible Accounts

Accounts receivable that a business does not expect to collect due to customers' inability or unwillingness to pay, often leading to a write-off.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board that guides the financial reporting for companies outside of the United States.

GAAP

Generally Accepted Accounting Principles, a common set of accounting rules and standards for financial reporting in the United States.

Pledging

The act of providing assets as security or collateral for a debt.