Bond-warrant package has different effects on the firm's cash flow and capital structure than the convertible bond.

Question

Quizplus · Accepted Answer

A bond-warrant package includes both bonds and warrants, which give the holder the option to buy more shares of the company at a later date. This can affect the firm's cash flow by bringing in additional revenue if the warrants are exercised, but it can also impact the capital structure by diluting the ownership of existing shareholders. In contrast, a convertible bond can also affect the firm's cash flow and capital structure, but it allows the investor to convert the bond into a fixed number of shares at a specified time, without the optionality of warrants.

Bond-Warrant Package Has Different Effects on the Firm's Cash Flow