Which of the Following Would Not Be a Sensible Explanation

question 29

Multiple Choice

Which of the following would not be a sensible explanation of why convertibles and warrants are issued if markets are efficient?

• A)Cash flow from these securities best match cash flow of the firm.
• B)If the firm does well,convertible bonds will turn out to have been the better alternative versus issuing ordinary equity.
• C)The securities are useful when it is costly to assess the risk of the issuing firm.
• D)The securities may resolve agency problems associated with raising money.
• E)All of the above are sensible explanations.

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Definitions:

Departmental Sales

This term involves the revenue generated by different departments within a larger retail store or company, tracked separately to gauge performance.

Responsibility Accounting

An accounting system that collects, summarizes, and reports financial information related to the responsibilities of individual managers or departments, encouraging accountability.

Performance Report

A document that evaluates the output, efficiency, and effectiveness of an individual's or organization's performance.