Questions from Financial Management

Q: Is preferred stock more like bonds or common stock? Explain.

Is preferred stock more like bonds or common stock? Explain.

Q: What effect does the trend in stock prices (subsequent to issue

What effect does the trend in stock prices (subsequent to issue) have on a firm’s ability to raise funds through: (a) convertibles and (b) warrants?

Q: If a firm expects to have additional financial requirements in the future

If a firm expects to have additional financial requirements in the future, would you recommend that it use convertibles or bonds with warrants? What factors would influence your decision?

Q: What does it mean to “manage” risk? Should its

What does it mean to “manage” risk? Should its stockholders want a firm to “manage” all of the risks it faces?

Q: How does a firm’s dividend policy affect each of the following?

How does a firm’s dividend policy affect each of the following? a. The value of its long-term warrants b. The likelihood that its convertible bonds will be converted c. The likelihood that its warrant...

Q: Evaluate the following statement: “Issuing convertible securities is a means

Evaluate the following statement: “Issuing convertible securities is a means by which a firm can sell common stock for more than the existing market price.”

Q: Suppose a company simultaneously issues $50 million of convertible bonds with

Suppose a company simultaneously issues $50 million of convertible bonds with a coupon rate of 10% and $50 million of straight bonds with a coupon rate of 14%. Both bonds have the same maturity. Does...

Q: Define each of the following terms: a. Preferred stock

Define each of the following terms: a. Preferred stock b. Cumulative dividends; arrearages c. Warrant; detachable warrant d. Stepped-up price e. Convertible security f. Conversion ratio; conversion pr...

Q: Why do companies use so many different types of instruments to raise

Why do companies use so many different types of instruments to raise capital? Why not just use debt and common stock?

Q: The Raattama Corporation had sales of $3.5 million last

The Raattama Corporation had sales of $3.5 million last year, and it earned a 5% return (after taxes) on sales. Recently, the company has fallen behind in its accounts payable. Although its terms of p...