Concept 21.6-2 Option on assets of the firm
Fundamentals of Corporate Finance
Berk, DeMarzo, and Harford
05th Edition
A share of stock is a ______ option written on the assets of the firm with the strike equal to ___.
A share of stock is a ______ option written on the assets of the firm with the strike equal to ___.
Debt holders of a corporation can be thought of as owning the firm but having ___ a call option on the assets of the firm with the strike equal to ___.
Equity holders have the incentive to ___ the volatility of the firm, which is a cost to ___.
Identify the false statement regarding options.
When preparing a statement of cash flows, it is necessary to report cash equivalents as separate items from cash.
The cash flows from operating activities in a cash flow statement include the components of net income reported on a cash basis.
Under both the direct and indirect methods of reporting cash flows from operating activities, cash paid for taxes and interest must be disclosed on the face of the statement or in the disclosure notes.
If cash dividends payable decrease, it indicates that the amount of dividends declared was lower than the amount of dividends paid.
In the statement of cash flows, interest payments on debt are categorized as cash outflows from financing activities. Is this statement true or false?
Transactions that involve noncash investing and financing activities must be disclosed either in the statement of cash flows or in the notes to the financial statements.