True or False and Why? 1) When preferred stock has a convertible component in it
ID: 2804380 • Letter: T
Question
True or False and Why?
1) When preferred stock has a convertible component in its offering, the conversion ratio is the ratio that determines how many shares of common stock the investor can secure for each share of preferred stock they own.
2) One source of potential conflict between bond and stockholders is the amount of liquidity the company should maintain
3) The prospectus for stock and a bonds covenant agreement are legal documents which describe certain parameters or obligations of the company to holders
4) The sale of a manufacturing facility is part of the operating activities portion of the three-part cash flow statement
Explanation / Answer
1.
When preferred stock has a convertible component in its offering, the conversion ratio is the ratio that determines how many shares of common stock the investor can secure for each share of preferred stock they own. usually conversion ratio is determined by preferred stock price divided by common stock price.
Statement is true.
2.
conflict of liquidity arise between creditor (supplier) and equityholder. bonds are usually issued for long long term so, conflict does not arise between shareholder and equityholder because of liquidity.
Statement is false.
3.
The prospectus for stock and a bonds covenant agreement are legal documents which describe certain parameters or obligations of the company to holders.
Statement is true.
4.
The sale of a manufacturing facility is part of the investing activities activities portion of the three-part cash flow.
statement.
Statement is false.
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