A ________ permits the firm's capital structure to be changed without increasing the total financing.
A) put option
B) stock-purchase warrant
C) conversion feature
D) repurchase agreement

Question

Quizplus · Accepted Answer

A conversion feature in a security such as a bond or preferred stock allows the holder to convert their security into a specified number of common shares of the issuing company. This allows the firm's capital structure to be changed without increasing the total financing since the conversion simply changes the form of the security already issued. Therefore, the correct answer is option C.

A ________ Permits the Firm's Capital Structure to Be Changed