Two Major Differences Between a Warrant and a Call Option

question 18

Multiple Choice

Two major differences between a warrant and a call option are:

• A)Warrants are contracts outside of the firm while options are within the firm.
• B)Warrants have long maturities while options are usually short maturities.
• C)Warrant exercise dilutes the value of equity while option exercise does not.
• D)Both A and C.
• E)Both B and C.

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Definitions:

Sales Revenue

The total amount of money generated from sales of goods or services before any costs or expenses are subtracted.

Invested Capital

The total amount of money invested into a company by shareholders and debtors, used to fund the company's operations and growth.

Residual Income

Income that remains after all costs and expenses, including a charge for capital, have been deducted.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit of the investment by its initial cost.