Your Firm Uses Both Preferred and Common Stock as Well

question 152

Multiple Choice

Your firm uses both preferred and common stock as well as long-term debt to finance its operations. Which one of the following will increase the capital structure weight of the debt, all else equal?

• A) An increase in the market price of the common stock.
• B) An increase in the number of shares of preferred stock outstanding.
• C) An increase in the quoted price of the firm's bonds as a %age of face value.
• D) The exercise of warrants by company employees.
• E) The conversion of convertible bonds into equity shares.

---

Definitions:

Federal Budget Deficit

The financial shortfall when a government's expenditures exceed its revenues within a fiscal year.

National Debt

The total amount of money that a country's government has borrowed, usually as a result of spending more than it receives in income.

Trillion

A numerical value representing a thousand billion, or 1,000,000,000,000, commonly used in discussing government budgets, economic indicators, and astronomical distances.

Public Debt

The amount of federal securities outstanding, which represents what the federal government owes (the accumulation of federal deficits minus surpluses over the last two centuries).