Kang's Management Has the Option of Converting $100,000 in Debt

question 9

Multiple Choice

Kang's management has the option of converting $100,000 in debt into common shares of the company.What impact would the conversion have on the company's solvency as measured by the debt-to-total-assets and its liquidity as measured by the current ratio?

• A)The solvency would improve, but the liquidity would deteriorate.
• B)Both the solvency and the liquidity would improve.
• C)The solvency would improve, but the liquidity would remain unchanged.
• D)The solvency would not be affected, but the liquidity would improve.

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Definitions:

Existing Customer

An individual or business that has previously purchased goods or services from a company, distinguishing them from new or potential customers.

Frederick Reichheld

A business strategist best known for his work on customer loyalty, including the development of the Net Promoter Score (NPS) as a measure of customer loyalty and satisfaction.

Customer Repurchase Rates

The frequency or likelihood with which a company's customers buy its products or services again.

Long-Term Customer Retention Rate

A measurement of how well a company can retain its customers over an extended period, indicating customer loyalty and satisfaction.