Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which one of the following best describes the primary purpose of derivatives markets?

To record and report the historical cost of financial assets

To facilitate the direct purchase and sale of physical commodities

To provide companies with long-term financing through the issuance of shares

To allow investors to hedge risk or speculate on price movements of underlying assets

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Verified step by step guidance

Understand the concept of derivatives markets: Derivatives are financial instruments whose value is derived from an underlying asset, such as stocks, bonds, commodities, or currencies. They are used for hedging risk or speculating on price movements.

Clarify the purpose of derivatives markets: The primary purpose is to allow investors to manage risk by hedging against potential losses or to speculate on future price movements of the underlying assets.

Eliminate incorrect options: Review each option provided in the question and determine whether it aligns with the primary purpose of derivatives markets. For example, recording historical costs, facilitating direct purchase of commodities, or issuing shares are not the main functions of derivatives markets.

Focus on the correct option: The correct answer is the one that directly relates to the purpose of derivatives markets, which is to allow investors to hedge risk or speculate on price movements of underlying assets.

Summarize the reasoning: The derivatives market exists to provide tools for risk management and speculation, making it distinct from other financial markets that focus on asset trading or financing.