The Typical Business Activity in the Financing and Investment Cycle

question 1

Multiple Choice

The typical business activity in the financing and investment cycle that requires an accounting entry is:

• A)short- and long-term forecast.
• B)meeting with investment bankers.
• C)proposal to board of directors for investing excess monies.
• D)investment of excess funds in temporary or long-term securities.

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Definitions:

European Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified asset at a predetermined price before or at a specified expiration date, exercisable only at the expiration.

Expiration Date

Refers to the date on which a derivative contract (such as options or futures) ceases to exist and its right to execute is no longer valid.

Exercise Price

The exercise price is the price at which an option holder can buy (call option) or sell (put option) an underlying asset or security.

Call Option

An agreement in finance that allows the owner the option, but not the requirement, to purchase a stock, bond, commodity, or different asset at a determined price during a defined timeframe.