Develop brief answers to each of the following questions; 1. Why would a company want to issue
Question:
Develop brief answers to each of the following questions;
1. Why would a company want to issue callable preferred stock?
2. What arguments can you give for treating preferred stock as debt rather than equity when carrying out financial analysis?
3. What relevance does par value or stated value have to a financial ratio, such as return on equity or debt to equity?
4. Why is treasury stock not considered an investment or an asset?
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
Step by Step Answer:
1 Callable preferred stock gives the company greater flexibility The company can eliminate the relat...View the full answer
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Treasury stock refers to shares of a company\'s own stock that the company has bought back from its shareholders and now holds as a form of asset on its balance sheet. When a company buys back its own stock, it reduces the number of outstanding shares in the market, which can potentially increase the value of the remaining shares. Treasury stock can be acquired through a variety of methods, such as open market purchases, negotiated transactions, or as a result of converting convertible securities. Companies may buy back their own shares for a number of reasons, including to return capital to shareholders, to signal confidence in the company\'s future, or to use the shares for employee stock option plans. While treasury stock does not pay dividends, it can be reissued by the company at a later time, which could dilute the value of the remaining shares. Companies are required to report their treasury stock holdings in their financial statements.
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