Hedging Through Futures Contracts

question 36

Multiple Choice

Hedging through futures contracts:

• A)increases risk of loss if prices fall.
• B)eliminates profit maximization potential.
• C)is considered to be speculative in nature.
• D)All of the above

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Definitions:

Income-Sharing Ratio

The proportion at which partners in a partnership agreement divide profits and losses among themselves.

Winding Up

The process of dissolving a company, involving liquidating assets to pay off creditors and distributing any remaining assets to shareholders.

Capital Account Balance

The net result of public and private international investments flowing in and out of a country, reflecting changes in ownership of national assets.

Net Income

The amount of profit a company generates after all expenses, taxes, and costs have been subtracted from total revenue.