When a company has a convertible bond in its capital structure,;

Question

Quizplus · Accepted Answer

Convertible bonds can be beneficial for companies as they offer the flexibility to either pay the interest and principal as per the maturity date or convert the bonds into equity shares. If the company decides to convert the bonds into shares, it can reduce its debt-to-equity ratio, which is a good sign for investors as it shows that the company is reducing its financial risk. Therefore, the best option is A.

When a Company Has a Convertible Bond in Its Capital