Suppose Superior Textiles Ltd Has Negotiated a Call Option Contract

question 11

Essay

Suppose Superior Textiles Ltd has negotiated a call option contract on 50,000 kg of wool at an exercise price of $12.00/kg.The seller of this call option charges a premium of $1.20/kg,so the total premium is $60,000.Under the terms of the agreement,Superior Textiles is only able to buy the wool from the option writer on the expiry date,which is in three months time.Would the option be exercised in three months time if the price of wool is $14.00/kg? What would be the gain/loss arising from using the call option?

Describe the concept of referent power and its impact on influence processes.

Understand how power is distributed and exercised within organizations, including through institutionalization and subunit influence.

Assess the importance of expertise and information control in enhancing an individual's power base.

Explore the ethical implications and potential consequences of power usage in organizations.

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Definitions:

Prepaid Insurance

An asset account that represents insurance payments made in advance for coverage extending into the future.

Adjusting Entry

An accounting journal entry made at the end of an accounting period to record any unrecognized income or expenses for the period.

Unexpired Amounts

Refers to the portion of an expense that has not yet been consumed or used up during the accounting period, often related to prepaid expenses or insurance premiums.

Insurance Expense

The cost incurred by a company to obtain insurance coverage for its operations, assets, or liabilities.