When a Company Has a Convertible Bond in Its Capital

question 9

Multiple Choice

When a company has a convertible bond in its capital structure,;

• A) it can reduce its debt-to-equity ratio by calling the bond.
• B) there is no effect on the firm's basic earnings per share.
• C) there is no advantage to the firm in forcing conversion of the bonds.
• D) it should ignore the conversion feature.

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Definitions:

Healthy Growth

The process of developing physically, emotionally, mentally, and socially in ways that are considered beneficial and constructive.

Potential

The inherent ability or capacity for growth, development, or coming into being.

Behaviorism

The view that psychology should be an objective science that studies behavior without reference to mental processes. Most research psychologists today agree with the first part but not with the second part.

Mental Processes

refer to internal, subjective experiences we infer from behavior, including thoughts, beliefs, and feelings.