WEEK 6 discusion 1

1)  Explain why companies issue convertible securities. 

2) Discuss the similarities and the differences between convertible debt and debt issued with stock warrants. 

Answer:  

Professor and class,

Convertible bonds have the option of conversion into a common stock at a specified price during a particular period. Stock purchase warrants are given with bonds (or preferred stock) permitting the purchase of the company's common stock at a stated price at anytime. While both offer enticement to potential investors by giving an added avenue of return by locking in a stock price for a period of time, only the stock warrants bring additional funds into the company leaving the existing debt. When convertible bonds are converted to stock, the company's debt ratio is reduced as the debt is replaced by the stock. 

Thank you,

Stephen

Reference:

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (17th Edition). Wiley Global Education US. https://devry.vitalsource.com/books/9781119503682

Instructions:

write the answer for question no 1 in one paragraph.

write the peer review for 2nd question in one paragraph.