Carie Opted to Exercise Her May Option on April 3^rd

question 13

Multiple Choice

Carie opted to exercise her May option on April 3^rd and received $1,750 in exchange for her shares.She must have owned a(n)

• A)warrant.
• B)American call.
• C)American put.
• D)European put.
• E)European call.

Analyze the rationale behind firms opting for equity offerings over debt issuances despite the cost implications.

Define key terms related to equity offerings, including dilution, ex rights, and oversubscription privilege.

Understand the reasons behind the prevalence of debt offerings over equity offerings.

Comprehend the challenges involved in pricing an Initial Public Offering (IPO).

---

Definitions:

Uncollectible Accounts Expense

An expense account reflecting the cost of accounts receivable that a company does not expect to collect.

Allowance for Doubtful Accounts

A contra asset account that reduces the total amount of accounts receivable on the balance sheet to reflect the likelihood of some accounts being uncollectible.

Net Credit Sales

The total value of sales made on credit after subtracting any returns and allowances, reflecting the actual sales revenue expected to be collected.

Allowance for Doubtful Accounts

A contra-asset account that represents the amount of receivables a company does not expect to actually collect.