Which of the Following Statements Related to the Benefits of Corporate

question 8

Multiple Choice

Which of the following statements related to the benefits of corporate hedging using forward and futures contracts is INCORRECT?

• A) Hedging can enable the locking-in of stable prices and facilitate the planning of production and marketing activities with greater certainty.
• B) Hedging can permit forward pricing of products.
• C) Hedging can facilitate the raising of capital.
• D) Hedging can reduce the risk of default and financial distress.
• E) Hedging can enable a firm to develop a diverse product line.

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Definitions:

Productive Facilities

Physical locations such as factories or offices where economic goods are produced or services are provided, utilizing labor, machinery, and equipment.

Land Improvements

Enhancements to a plot of land such as landscaping, parking lots, and fences that add value but are subject to depreciation.

Land Account

A financial ledger entry that represents the value of land owned by an entity.

Salvage Value

The estimated resale value of an asset at the end of its useful life, often considered in depreciation calculations.