If You Consider the Equity of a Firm to Be

question 40

Multiple Choice

If you consider the equity of a firm to be an option on the firm's assets,then the act of paying off debt is comparable to ________ on the assets of the firm.

• A)purchasing a put option
• B)purchasing a call option
• C)exercising an in-the-money call option
• D)exercising an in-the-money put option
• E)selling a call option

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Definitions:

Gross Profit

Gross profit is the financial measure calculated by subtracting the cost of goods sold from revenue, indicating the efficiency in production and pricing.

LIFO Method

An inventory valuation method that assumes the last items placed in inventory are the first sold, known as Last-In, First-Out.

FIFO Method

A method of inventory valuation where the first items purchased are the first ones to be sold, standing for First In, First Out.

Inventory Valuation

The method or process by which the total value of a company's inventory is determined, based on the cost of goods, market value, or an agreed-upon valuation mechanism.