The Common Stock of BioTech Industries Pays a Dividend of $1

question 117

Multiple Choice

The common stock of BioTech Industries pays a dividend of $1 per share and has a current market price of $27 per share. The convertible bond is selling for $1100. The payback or breakeven time for the bond is

• A) 1.75 years.
• B) 2.89 years.
• C) 3.20 years.
• D) 3.60 years.
• E) 4.32 years.

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Definitions:

Liquidity

The ease with which an asset can be converted into cash without affecting its market price.

Receivables Turnover

A financial ratio that measures how efficiently a company collects debt from its credit sales, calculated by dividing net credit sales by the average accounts receivable.

Inventory Turnover Ratio

A measure of how quickly a company sells its inventory within a given period, calculated by dividing the cost of goods sold by the average inventory.

Credit Sales

Sales made by a business allowing the customer to pay at a later date, often tracked through accounts receivable.