The Most Common Reason That Corporate Firms Use the Futures

question 59

Multiple Choice

The most common reason that corporate firms use the futures and options markets is:

• A) to hedge risk.
• B) to take risk.
• C) to make deposits.
• D) none of the above.

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Definitions:

ROE

Return on Equity; a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how much profit a company generates with the money shareholders have invested.

Debt

Debt represents money borrowed by one party from another, under the condition that it is to be paid back with interest, typically used for business operations or purchases.

Operating Leverage

A measure of how sensitive a company's operating income is to a change in its sales volume.

Labor-saving Equipment

Tools or machinery designed to reduce the amount of labor needed to perform a job, often leading to enhanced efficiency and lower labor costs.