The margin deposit associated with the purchase of a futures contract
A) is a partial payment on the contract with the amount of the payment equal to 10% or more of the contract value.
B) represents the purchasers equity in the contract with the balance of the contract financed with borrowed funds at the margin rate of interest.
C) is related to the value of the item underlying the contract.
D) is used to cover any loss in market value of the contract resulting from adverse price fluctuations.
Answer: D
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Graham Corporation's budgeted production schedule, by quarters, for the coming year is as follows:Quarter 1 = 22,500 unitsQuarter 2 = 19,000 unitsQuarter 3 = 17,000 unitsQuarter 4 = 24,000 unitsEach unit of product requires three pounds of direct material. The company's policy is to begin each quarter with 30% of that quarter's direct materials production requirements.Graham expects to have 50,000 pounds of direct materials on hand at the beginning of Quarter 1.What would be Graham's budgeted direct materials purchases (in pounds) for the first quarter?
What will be an ideal response?
Which of the following is NOT a factor offsetting the tax advantage of debt as a source of financing?
A) increased agency costs B) increased probability of financial distress (bankruptcy) due to fixed interest payments C) alternative tax shields to those supplied by interest payments D) All of the above offset the tax advantage of debt as a source of financing.