The Net Effect on the Corporation's Books of the Declaration

question 18

Multiple Choice

The net effect on the corporation's books of the declaration and payment of a cash dividend are to

• A)decrease liabilities and decrease shareholders' equity.
• B)increase shareholders' equity and decrease liabilities.
• C)decrease assets and decrease shareholders' equity.
• D)increase assets and increase shareholders' equity.

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Definitions:

Call Price

The price at which a bond or other financial instrument can be redeemed by the issuer before its maturity.

Exercise Price

The rate at which an option's owner is permitted to purchase or sell the underlying asset.

Option Contract

A contract which gives the buyer the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price prior to or on a specified date.

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a certain period.