A Share of Stock Is a ________ Option on the Value

question 40

Multiple Choice

A share of stock is a ________ option on the value of assets of the firm with a strike price equal to ________.

• A)put option,face value of debt
• B)call option,market value of equity
• C)call option,face value of debt
• D)put option,market value of equity
• E)put option,market value of debt

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Definitions:

Dividends

Payments made by a corporation to its shareholder members, usually as a distribution of profits.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, revealing profit or loss.

Retained Earnings

Retained earnings are the portion of a company’s profits that is kept or retained rather than being paid out as dividends to shareholders or reinvested into the business.

Closing Entries

Entries recorded at the conclusion of an accounting cycle to shift balances from temporary to permanent accounts.