For Most Firms the Principle Reason for Hedging Is

question 61

Multiple Choice

For most firms the principle reason for hedging is

• A) to reduced the likelihood of financial distress.
• B) to comply with SEC regulations concerning firm risk tolerances.
• C) to satisfy the owners of the firm's shares.
• D) to satisfy the owners of the firm's debt.

---

Definitions:

Rental Charges

Costs associated with leasing or renting property or equipment.

Fixed Cost

Expenses that do not change in total regardless of the level of production or sales activity, such as rent, salaries, and insurance premiums.

Machine Hour

A machine hour is a unit of measurement representing the operation of machinery or equipment for one hour, used in calculating cost allocation and operational efficiency.

Total Variable Costs

The sum total of all costs that vary with the level of output or production volume, such as materials and labor directly involved in production.