When warrants are used as "sweeteners" by a new firm, the firm is essentially allowing creditors to ________.
A) vote along with common stockholders
B) share the possible future success of the firm
C) protect their interest
D) receive extra income

Question

Quizplus · Accepted Answer

Warrants give the holders the right to purchase additional shares of common stock at a specified price in the future. By offering warrants as a sweetener, the new firm is essentially allowing creditors to share in the possible future success of the company. This helps make the deal more attractive to potential lenders, as they have the potential to earn additional profits if the company performs well.

When Warrants Are Used as "Sweeteners" by a New Firm