Question

A forced conversion will typically alter the corporate balance sheet favorably. True False

A forced conversion will typically alter the corporate balance sheet favorably.

True

False

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Answer #1

True

A forced conversion refers to a situation when the companiy gives conversion option on bonds or securities, This conversion option is beneficial to the company as the securities can be coverted into the shares if the coupon rate is higher and the company can issue new securities at lower coupon rate or interest rate which will help the company to reduce the cost of issuing securities.

Therefore, It is typically favorable in to the corporate balance sheet

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