16. [Take-or-pay agreements] The following paragraphs were extracted from an article in the Financial Times on March
Question:
16. [Take-or-pay agreements] The following paragraphs were extracted from an article in the Financial Times on March 4, 1903 Brazilians Cannot Afford to Cut Aluminum Losses Any hopes that Brazil will this year relieve the pressure of oversupply on the languishing aluminum market by cutting its output seem destined to be disappointed. De- spite a combination of low international prices and what local industry considers high domestic energy costs, the country registered record production of aluminum in 1992, and output is expected to remain at a similar level this year Many energy contracts are "take-or-pay" agree. ments. Some bauxite supply contracts run on a "take-or-pay" basis. meaning that (aluminum) produc- ers must withdraw their share of raw material whether or not they intend to use it. Explain the relationship between these two paragraphs. (Note Aluminum is refined from bauxite using large amounts of energy.)
Step by Step Answer:
The Analysis And Use Of Financial Statements
ISBN: 9780471375944
3rd Edition
Authors: Gerald I. White, Ashwinpaul C. Sondhi, Haim D. Fried