9 assume a commodity producer does not hedge Which of the st

9. assume a commodity producer does not hedge. Which of the statements is most likely FALSE:

a. If commodity prices rise, operating margins could increase

b. If commodity prices rise, total assets increase on the balance sheet

c. If commodity prices fall, total assets decrease on the balance sheet

d. If commodity prices fall, net income decreases if assets are recognized to be impaired

e. Being lower on the cost curve makes a producer more risky than comparables

Solution

a. If commodity prices rise, operating margins could increase

Commodity price risk is the uncertainty that stems from changing prices that adversely impacts the financial results of those who both use and produce that commodity.

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