StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

DBDQ1 Convertible Bonds and DQ2 Market Value of Stock - Essay Example

Cite this document
Summary
DQ1 The use of debt instruments such as bonds can help companies acquire capital that can be used to develop new products, cover operating costs, or to expand into new marketplaces. A special type of bond is a convertible bond. A convertible bond can be defined as a bond that can be converted into a predetermined amount of a company’s equity during the lifetime of the bond (Investopedia, 2011)…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER95.8% of users find it useful
DBDQ1 Convertible Bonds and DQ2 Market Value of Stock
Read Text Preview

Extract of sample "DBDQ1 Convertible Bonds and DQ2 Market Value of Stock"

DQ1 The use of debt instruments such as bonds can help companies acquire capital that can be used to develop new products, cover operating costs, orto expand into new marketplaces. A special type of bond is a convertible bond. A convertible bond can be defined as a bond that can be converted into a predetermined amount of a company’s equity during the lifetime of the bond (Investopedia, 2011). The issuer of the bond benefits from the bond conversation mechanism because the issuer can eliminate bonds from the marketplace when the market conditions are unfavorable.

Another reason a company might desire to convert a bond into equity is if the company does not want to pay of the principal of the bond due to cash flow problems. The bondholder of a convertible bond benefits from the conversion of a bond into equity when the prices of the common stocks in the market are higher than the principal. DQ2 The stock market is used by investors and businesses to buy and sell common stocks of corporations. The prices of a stock are influenced by a variety of factors.

The economy affects the prices of common stocks. When the economy is doing badly the prices of common stocks go down. Another factor that affects the price of a stock is the financial performance of a company. A solid financial performance reflected in the financial statements of the company can help increase the value of a stock. A third factor that affects the price of a specific stock is the market. The market risk is measured by the Beta coefficient (Besley & Brigham, 2002). Out of these three factors the only factor that the firm can control is the financial performance of the firm.

I consider the financial performance of the firm the most important factor. References Besley & Brigham (2000). Essential of Managerial Finance (12th ed.). Forth Worth: The Dryden Press. Investopedia.com (2011). Convertible Bond. Retrieved May 15, 2011 from http://www.investopedia.com/terms/c/convertiblebond.asp

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“DBDQ1 Convertible Bonds and DQ2 Market Value of Stock Essay”, n.d.)
Retrieved from https://studentshare.org/other/1421624-dbdq1-convertible-bonds-and-dq2-market-value-of-stock
(DBDQ1 Convertible Bonds and DQ2 Market Value of Stock Essay)
https://studentshare.org/other/1421624-dbdq1-convertible-bonds-and-dq2-market-value-of-stock.
“DBDQ1 Convertible Bonds and DQ2 Market Value of Stock Essay”, n.d. https://studentshare.org/other/1421624-dbdq1-convertible-bonds-and-dq2-market-value-of-stock.
  • Cited: 0 times

CHECK THESE SAMPLES OF DBDQ1 Convertible Bonds and DQ2 Market Value of Stock

Comments on DQ1 and DQ2,KS and CH

One would assume that the fair market value of a stock should be the absolute law when accounting for equity investment since the market value is the price that everyone uses when selling or buying a particular stock.... DQ2 The fair market value argument is something that accountants have pondered for a long time.... If a company does not intend on selling a stock in the near future the market value has no relevance.... Making adjustments based on market value would be a troublesome task for accountants....
1 Pages (250 words) Essay

DB10,DQ1: Profit MJargin and Financial Well Being. and DQ2 : Stock Market Favor,

DQ2 The price earnings (P/E) is a measure or index that shows whether a stock is expensive or cheap in relation to the firm's current earnings.... The current ratio is calculated dividing the market price per share of a stock by the earnings per share (EPS).... The stock market would favor Microsoft because its P/E is much higher than General Motors.... Performing other ratio calculations to test other aspects of the business such as leverage, efficiency, or market ratios can also help in the analysis....
1 Pages (250 words) Essay

DQ1:P Valuable Course Aspect and DQ2:Concepts of the Course

I plan on using what I learned about financial statements in order to evaluate potential investment opportunities in the stock market.... dq2 A concept from this course that can be applied to a future work position is horizontal and vertical analysis.... DQ1 The most valuable aspect of this course was the knowledge I gained about financial statements....
1 Pages (250 words) Essay

Mutual Funds: Equity, Bond, and Money Market Varieties

Rather than allocating one's money to a particular investment, for instance a stock or a bond, a collective fund is established, professionally managed, and then invested on behalf of a large group of investors.... Investors, as a result, are investing their money in a company rather than in an individual stock or other financial instrument.... The price paid for these mutual fund shares is determined by calculating a net asset value (NAV) for the investments underlying a particular mutual fund in addition to associated purchase or broker fees....
10 Pages (2500 words) Essay

International Depository Receipts

Since the pricing of DRs reflects the UK pounds value of a foreign security currency movements will work to an investor's advantage when the foreign country's currency drops in value in relation to the UK currency.... The value of DRs will drop when the foreign currency increases in value against the UK pound of sterlings.... DRs are legal obligations of the issuing agent and not of the firm that issued the stock.... stock exchanges, however, is problematic, Disclosure requirements are among the strictest in the world....
5 Pages (1250 words) Essay

Corporate Finance - Stocks and Bonds

bonds and stocks are types of securities, and they are each related to a different set of circumstances that govern the relationship between investor and investee.... nbsp; The behaviour of the significant variables – the expected rate of return of the asset, the expected return of the market, and the risk-free rate – relative to each other still provides a helpful guideline in making decisions concerning portfolio investments.... Raising money from the bonds market....
9 Pages (2250 words) Coursework

Stock Vs. Bonds

The author of the essay "Stock versus Bonds" states that the stocks have historically had much higher returns than bonds and identifies can these excess returns be justified by the higher risk attached to stocks, or are there alternative explanations  … In assessing whether stocks have higher risks when compared to stocks, it is possible to arrive in justifiable explanations based on a comparative analysis.... In this regard, an assessment can best be viewed when analyzing portfolios that are engaged in 100% bonds versus portfolios that are 100% stocks However, before delving further into this economic argument it is best to, first of all, understand the definition and composition entailed in the term 'risk....
6 Pages (1500 words) Essay

Money Markets, Bonds Market, Mortgages

Bonds market is one of mean that move the savings from saver to the issuers or companies who require capital for their ongoing projects or new expansions, this market is presumed to be a market of fixed return, although it appears complex but it is also driven by the same risk and return tradeoff as like in stock market, basically bonds market can be divided into three main groupings i.... The paper "Money Markets, Bonds market, Mortgages" states that Bonds market is a market where debt securities are issued and traded, the instruments of bond market include govt-issued securities (like saving bonds, treasury bills and notes),  and corporate debt securities....
9 Pages (2250 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us