Which of the Following Actions Would Necessarily Result in a Higher

question 14

Multiple Choice

Which of the following actions would necessarily result in a higher debt-equity ratio, all else equal?

• A)Convertible bondholders convert their bonds to shares of common stock.
• B)The value of the firm's equity increases because of a lower cost of equity capital.
• C)Warrant owners exercise their warrants.
• D)The firm uses its excess cash to repurchase some of its shares.

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Definitions:

Owner's Equity

The residual interest or ownership claim in the assets of an entity after deducting its liabilities.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders’ equity at a specific point in time.

Liabilities

Financial obligations or debts a company owes to external parties or entities.

Statement of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives from its ongoing operations, financial activities, and investment activities.