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.

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Definitions:

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments not considered cash equivalents.

Free Cash Flow

The cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It's an important measure of financial health.

Capital Expenditures

Resources allocated by a business to procure, enhance, and sustain material assets like land, factory structures, or equipment.

Cash Dividends

Payments made out of a corporation's earnings to its shareholders, typically distributed as a fixed amount per share of stock.