Thomas Foods Essay

1132 Words Apr 30th, 2015 5 Pages
In the present dynamic business environment, it is very important that we understand the environment of business and take initiatives which protect the future income for the business. If we never watch transactions in line with the recent development in the market, it actually leads to dangerous situation; where in there won’t be any control on the business and eventually leading to loosing the existence of business. Let us understand the business model of Thomas Foods which is incorporated in the year 1969. Viewing the business model of Thomas Foods, it procures the very crops from farmers and they supply the same to the grocery stores. Due to the environment conditions, the price of the crops keep changing very often and it also happens …show more content…
Generally all the future contracts are standardized which facilitate trading with proper quality and quantity of commodity. So in this case the crop prices will decide for future for certain quality of crop with certain crop. So that the corporation knows that, to what extent the price will move and how the price movement will have impact on the cash flows. Generally each future contract represents a specific type of underlying asset which need to be delivered on the delivery date. (ii) Forward Contract: Forward contracts are types of contract between two parties in order to purchase or sell the underlying asset at a specified price in future. Due to the simplicity of the contract and as it is very easy to understand forward contract, this happens to be the most popular contract among all the hedging tools that are available in the market. Generally a forward contact cannot be customized like future contract. In the field of agriculture, this is the fit in contract in order to go for hedging strategies. Forward contracts may take many initiatives in order to go for choosing the contract time and terms and conditions for the contract. While going for forward contract, it is very important that, we first of all should fix with our positions and then go for writing the terms and conditions with the other party with whom we are writing the contract. In case of forward

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