Which of the Following Statements About Convertible Securities Is True

question 17

Multiple Choice

Which of the following statements about convertible securities is true?

• A)They provide a guaranteed income stream, minimum value, and conversion
• B)The conversion premium is influenced by the volatility of the underlying common stock, term to maturity, and dividend payment relative to interest rate
• C)They are potentially dilutive to earnings and must be taken into consideration in the calculation of both primary and fully diluted earnings per share
• D)All of the above are true

---

Definitions:

Cost of Goods Sold

The immediate financial outlays involved in the manufacture of goods a company sells, such as labor and material expenses.

Price-Earnings Ratio

A valuation metric that compares a company's share price to its earnings per share.

Market-to-Book Ratio

The market-to-book ratio compares a company's market value (or capitalization) to its book value of equity, indicating how valued a company is in comparison to its accounting values.

Debt-Equity Ratio

The debt-equity ratio shows the comparative amount of shareholder equity and debt financing a company uses to support its assets.