A stock purchase warrant permits a firm to raise additional funds at some point in the future by selling common stock and thereby shifting the firm's capital structure to a less highly levered position.

Question

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A stock purchase warrant is a type of financial instrument that gives its holder the right, but not the obligation, to purchase a specific number of shares of common stock at a specified price within a certain period of time. By selling stock to the holder of the warrant, the firm can raise additional funds without incurring new debt, thereby lowering its leverage and shifting its capital structure to a less highly levered position. Therefore, the statement is true.

A Stock Purchase Warrant Permits a Firm to Raise Additional