Quiz 19: Financial Markets and Investment Strategies
Speculators are the investors having expertise in particular markets who take huge risk by using highly leveraged investments. If speculators will be barred from investing in the natural gas market then it would change the financial management approach of Person C. After this, Person C would not be able run their business successfully because the speculators helped them in financial prediction. Person S used this prediction for their financial budgeting. It will also obstruct their growth and development.
Paper profit or loss of a company shows the unrealized capital gain or loss of investments done by this company. Market price of some commodity is compared with the contracted price to assess the paper profit or loss. Although this is not a real profit or loss to a company, however they can be realized in future after the selling of commodity. Accounting regulations forces the companies to report these paper profit or loss in their financial reports, because although this is not the actual loss but it shows the unrealized profit or loss that a company will face in future. It also provides a clear picture to the investors regarding the financial budgeting of a company and accuracy of their financial predictions.
For the past few years, the natural gas prices are high despite of variations in the demand and supply. The prime accusers for this scenario are the Wall Street speculators. They are unfairly increasing the price of natural gases to gain undue advantages. This price increase will ultimately affect the consumers. They need to pay extra money for their natural gas consumption. Therefore, government should not allow speculations in natural gas as this is an unethical practice.