Which of the Following Is True About a Long Forward

question 18

Multiple Choice

Which of the following is true about a long forward contract

• A) The contract becomes more valuable as the price of the asset declines
• B) The contract becomes more valuable as the price of the asset rises
• C) The contract is worth zero if the price of the asset declines after the contract has been entered into
• D) The contract is worth zero if the price of the asset rises after the contract has been entered into

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Definitions:

Cost of Goods Sold

Cost of goods sold represents the direct costs attributable to the production of the goods sold by a company, including materials and labor.

Finished Goods Inventory

Finished and market-ready products still awaiting purchase.

Cost of Goods Available for Sale

The total cost of a company's inventory at the beginning of the period plus the cost of any goods produced or purchased during the period.

Direct Materials Cost

The cost of raw materials that can be directly traced to the production of goods.