Shift the risk of obsolescence from the user to the lessor

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Reference no: EM13874727

1. Which of the following statements is CORRECT?

a. A warrant is basically a long-term option that enables the holder to sell common stock back to the firm at an agreed upon price, at a specified time in the future.

b. If a company issuing coupon-paying debt wanted to reduce the cash outflows associated with the coupon payments, it could issue warrants with the debt to accomplish this.

c. One of the disadvantages of warrants to the issuing firm is that they are detachable and can be traded separately from the debt with which they are issued.

2. Which statement is TRUE?

a. Under a sale and leaseback arrangement, the seller of the leased property is the lessor and the buyer is the lessee.

b. Operating leases help to shift the risk of obsolescence from the user to the lessor.

c. Capital Leases are a form of Off-balance sheet financing

3. Which statement is TRUE?

a. A detachable warrant is a warrant that can be removed from the security with which it was issued and traded separately from it. Most traded warrants are originally attached to bonds or preferred stocks.

b. The owner of a convertible bond owns, in effect, both a bond and stock.

c. A convertible debenture can never sell for more than its conversion value or its straight bond value.

4. Which statement is TRUE?

a. The “preferred” feature of preferred stock means that it normally will provide a higher expected return than will common stock.

b. Preferred stock normally has no voting rights. However, most preferred issues stipulate that the preferred stockholders can elect a minority number of the directors if the preferred dividend is omitted.

c. Preferred stock typically has a par value, but the par value has no real meaning

Reference no: EM13874727

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