At Expiry, the Seller Holder of a Call Option (With

question 5

Multiple Choice

At expiry, the seller holder of a call option (with an exercise price of $32, sold for a premium of $0.85) over Wesfarmers shares (now trading at $32.50) will:

• A)be obligated to sell shares to the holder but still make a profit of $0.35 per share
• B)be obligated to sell shares to the holder but still make a profit of $1.35 per share
• C)be obligated to sell shares to the holder but still make a profit of $0.85 per share
• D)not be required to sell shares to the holder and make a profit of $0.85 per share.
• E)None of these are correct.

Understand the concept of legal capital and its implications for share value and corporate financing.

Identify and differentiate various types of stock (common, preferred, treasury) and their accounting treatment.

Compare and contrast the treatment of equity between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP).

Analyze corporate actions and their impact on shareholder equity, including dividends and treasury stock transactions.

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Definitions:

Bonus Benefits

Additional compensations above the regular remuneration package, often tied to performance or specific achievements.

Discretionary Spending

Expenditure over which a government or business has control and is not mandated by laws, such as research and development or advertising expenses.

Research and Development

Activities undertaken by a business to innovate and introduce new products or services, often entailing technical research and design.

Earnings Targets

Earnings Targets are specific financial goals set by a company, often related to earnings per share or net income, that it aims to achieve within a given timeframe.