Assume That for the Next Two Weeks,the Bondholders of Western

question 51

Multiple Choice

Assume that for the next two weeks,the bondholders of Western Markets have the option of exchanging their bonds for common shares of the firm's stock.As a result of these exchanges,you should expect the firm's debt-equity ratio to:

• A)decline and the stock's price to also decline.
• B)decline and the stock's price to remain constant.
• C)decline and the stock's price to increase.
• D)increase and the stock's price to increase.
• E)increase and the stock's price to remain constant.

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues.

Dividends

Monetary distributions from a company to its shareholders, often based on the profits of the business.

Net Income

Net income is the total profit of a company after all expenses and taxes have been deducted from total revenues.

Retained Earnings

Profits that a company keeps after dividends have been paid out to shareholders, often reinvested in the business or used to pay down debt.