From the Corporate Financial Officer's Viewpoint, Which of the Following

question 30

Multiple Choice

From the corporate financial officer's viewpoint, which of the following is a reason for not calling a bond for redemption when the conversion value is above the par value?

• A)Calling the bond may encourage everyone to take the stock rather than the par value in cash
• B)The after-tax cost of the dividends on the new shares might be higher than the after-tax cost of the interest expense on the existing convertible bond
• C)The chief financial officer might want to wait until interest rates decline before calling the bond
• D)The number of new shares on the market will cause the diluted earnings per share to decline

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Definitions:

Balance Sheet

The balance sheet is a financial statement that shows a company’s assets, liabilities, and shareholder equity at a specific point in time.

Spreadsheet

A software application that allows users to organize, analyze, and store data in tabular form.

Job-Order Costing

An accounting method used to assign costs to specific jobs or orders, tracking expenses in relation to each job's production costs.

Manufacturing Overhead

All manufacturing costs other than direct materials and direct labor, including maintenance, utilities, and depreciation of production facilities.