What Has Occurred When One Company Purchases the Right to Buy

question 45

Multiple Choice

What has occurred when one company purchases the right to buy a foreign currency sometime in the future at an exchange rate quoted today?

• A) The company has acquired a call option.
• B) The company has entered a forward contract.
• C) The currency has appreciated relative to the dollar.
• D) The company has acquired a put option.

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Definitions:

Inventory

The total amount of goods and materials held by a business for the purpose of resale or production.

Selling Expense

Costs incurred directly and indirectly in making sales, including advertising, shipping, and sales staff salaries.

Goods Sold

The total of merchandise that a company has sold to its customers within a specific period; often referred to as 'sales'.

Perpetual Inventory System

An inventory accounting system that records goods transactions in real-time.