A silver mining company has used futures markets to hedge the price it will receive for everything it will produce over the next 5 years. Which of the following is true?
A. It is liable to experience liquidity problems if the price of silver falls dramatically
B. It is liable to experience liquidity problems if the price of silver rises dramatically
C. It is liable to experience liquidity problems if the price of silver rises dramatically or falls dramatically
D. The operation of futures markets protects it from liquidity problems
B
The mining company shorts futures. It gains on the futures when the price decreases and loses when the price increases. It may get margin calls which lead to liquidity problems when the price rises even though the silver in the ground is worth more.
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A convertible bond is one that
A) can be converted into another bond if the issuer goes into bankruptcy. B) can be exchanged for a commodity such as silver or gold. C) is open-topped, meaning its redemption value can increase over time. D) can be converted into a specific number of shares of common stock of the issuer.
Great Kids Co. began providing day care for the children of employees of a large corporation on January 15 for an agreed monthly fee of $9,000. The first payment is to be received on February 15
The adjusting entry required by Great Kids Co. on January 31 includes: A. A credit to Child Care Fees Earned of $4,500. B. A debit to Child Care Fees Receivable of $9,000. C. A debit to Unearned Child Care Revenue of $4,500. D. A debit to Fees Receivable of $9,000.