Which of the Following Statements Is FALSE

question 9

Multiple Choice

Which of the following statements is FALSE?

• A)Firms generally do not possess better information than outside investors regarding the risk of future commodity price changes,nor can they influence that risk through their actions.
• B)Cash flows are exchanged on a monthly basis,rather than waiting until the end of the contract,through a procedure called marking to market.
• C)The firm may speculate by entering into contracts that do not offset its actual risks.
• D)When a firm authorizes managers to trade contracts to hedge,it opens the door to the possibility of speculation.

---

Definitions:

Capital Required

The total amount of funds needed to operate a business or undertake a project, including costs for assets, resources, and day-to-day operations.

Reported Earnings

This refers to the net income that a company officially reports in its financial statements for a specific period, reflecting the firm's financial performance.

Cumulative Preferred Stock

A type of preferred share that has the feature where omitted or unpaid dividends are accumulated and must be paid out before dividends can be issued on the company's common shares.

Common Shareholders

Individuals or entities that own common shares in a corporation, granting them rights to dividends and corporate decisions.