Which of the following does not describe derivatives? A. These financial instruments are often used to speculate. B. Insurance
is required when purchasing derivative securities. C. They are assets that derive their economic value from an underlying asset, such as a stock or bond. D. These financial instruments are often used to hedge against risk
B. Insurance is required when purchasing derivative securities
Explanation:
A derivative is a contract that is drives its values to form the underlying entity and can be interest rates and assets and includes the insurance against the price movement such as hedging.
<u>Some of the common derivatives are the futures, swaps and the options and forwards. </u>
Presto will record the acquisition cost of the equipment as $22,250 (21,500+430+320) which is the total cost for making the fixed asset ready for operation. The Generally accepted accounting principle requires a company to record all of the acquisition cost of a fixed asset. Thus, Presto company must capitalize all cost related to the fixed asset.
Variable costs are part of direct expenses incurred in the production of goods meant for sales. Variable costs have a direct and proportionate relationship with the output level. An increase in output level increases variable costs. Examples of variable costs are packaging and raw materials.
The contribution margin is the dollar amount available from the sale of each unit to cater for fixed costs and profits. It is calculated by subtracting variable costs from the selling price. The contribution margin is used in determining the break-even point and the output level required to achieve desired profits.
Interpersonal communication is the process by which people exchange information, feelings, and meaning through verbal and non-verbal messages: it is face-to-face communication.
