The following benefits occur to the corporation after forced conversion of a convertible bond except for which one?
A)Lower times interest earned ratio
B)Lower debt-to-asset ratio
C)Higher earnings after taxes
D)All of these options are benefits.

Question

Quizplus · Accepted Answer

Forced conversion of a convertible bond will result in the issuance of new equity shares which will increase the equity base of the company. This will result in a lower debt-to-asset ratio and higher earnings after taxes as interest payments will no longer be required to be made on the converted debt. However, it will not result in a lower times interest earned ratio as the interest expense will no longer be present, and thus the ratio will not be applicable.

The Following Benefits Occur to the Corporation After Forced Conversion