Most of the evidence to date indicates that firms with which two of the following characteristics are most apt to frequently use derivatives?
A) Low financial distress costs and constrained access to capital markets
B) Small in size and low financial distress costs
C) Easy access to capital markets and high financial distress costs
D) High financial distress costs and constrained access to capital markets
E) High financial distress costs and easy access to capital markets

Question

Quizplus · Accepted Answer

Firms with high financial distress costs and constrained access to capital markets are more likely to use derivatives as a risk management tool to mitigate their exposure to market fluctuations, as they have limited options for raising funds in the event of a financial crisis.

Most of the Evidence to Date Indicates That Firms with Which