Which of the Following Statements Is CORRECT

question 9

Multiple Choice

Which of the following statements is CORRECT?

• A) An option's value is determined by its exercise value,which is the market price of the stock less its strike price.Thus,an option can't sell for more than its exercise value.
• B) As a stock's price increases,the premium portion of an option on that stock increases because the difference between the stock price and the fixed strike price increases.
• C) If the company is consistently profitable,its call options will always be in the money.
• D) The market value of an option depends in part on the option's length of time until expiration and on the variability of the underlying stock's price.
• E) The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin becomes larger.

Calculate the cost of goods sold and understand its implications on financial statements.

Distinguish between variable and fixed costs in the context of product and period cost classifications.

Understand the importance of direct and indirect costs in cost accounting.

Comprehend the concept of manufacturing overhead and how it's applied in cost accounting.

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Definitions:

Future Cash Flows

The estimated amount of money to be received or paid out over a specified future period by an investment or business operation.

Stockbroker

A professional who buys and sells stocks and other securities on behalf of clients in exchange for a fee or commission.

Securities

Financial instruments that represent an ownership position in a publicly traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option.

Collateral

An asset that a borrower offers to a lender as security for a loan.