1 A call option whose exercise price is 7,10 TRY/$ and the spot price is 7,10 TRY/$ is said to be: Lütfen birini seçin:

Question

1 A call option whose exercise price is 7,10 TRY/$ and the spot price is 7,10 TRY/$ is said to be: Lütfen birini seçin: a. in-the-money. b. out-of-the-money. c. at-the-money. d. on-the-spot. Sonraki sayfa 2 Case Smith Medical, Inc., is a publicly owned corporation engaged in the manufacture of medical products. In recent years, the company has accumulated large amounts of inventory as a result of profitable operations. A recent annual report showed cash, cash equivalents and inventories amounting to more than 50% of the company’s total assets. During the period that these large holdings of cash, cash equivalents and inventories have accumulated, the company has paid no cash dividends. Some financial analysts thought Smith Medical was holding too much cash and inventory. Why is good inventory management essential to a firm’s success? If the company would reduce the current assets less than 50% of the total assets, what will be the impact of this decision on company liquidity,

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1 Since, Exercise price = Spot Price The option is at the money. The option C is correct. 2 a] Good inventory management is essential because : Holding too much inventory increases the investment in working capital, and therefore decreases the return on assets. This is because capital is locked up in inventory, and is idle (not being used productively). Holding too little inventory hampers smooth running of operations, because the right quantity of material may be unavailable at the right time. This may cause production delays and/or missed sales. Therefore, a balance must be struck between investing too much in inventory, and ensuring adequate inventory. This is the essence of good inventory management, and is key to a firm's success. Good inventory management ensure sufficient availability of inventory, while reducing the drag on profitability. b] If the investment in current assets is reduced, the impact is : Liquidity will be reduced because the value of liquid assets (current assets which can be immediately converted into cash without any loss in value) is reduced Profitability is increased because idle capital which is locked up in current asset is freed up and can be invested productively to earn a return Risk is slightly increased because the holding of liquid assets is reduced. In case of unexpected and substantial cash requirements, assets may have to be sold at a loss to raise the required cash

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1 A call option whose exercise price is 7,10 TRY/$ and the spot price is 7,10 TRY/$ is said to be: Lütfen birini seçin: a

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