Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following terms describes the process when bonds are retired because the bondholder exchanges them for the issuing company's stock?

Conversion

Redemption at maturity

Repurchase on the open market

Sinking fund retirement

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Verified step by step guidance

Understand the concept of bond retirement: Bond retirement refers to the process by which a company settles its bond obligations, either by paying off the bondholders or through other mechanisms.

Review the term 'conversion': Conversion occurs when bondholders exchange their bonds for the issuing company's stock, typically as part of a convertible bond agreement. This allows bondholders to become shareholders.

Compare the other options: Redemption at maturity refers to paying off the bond principal when the bond reaches its maturity date. Repurchase on the open market involves the company buying back its bonds from the market. Sinking fund retirement involves setting aside funds to retire bonds systematically.

Identify the correct term: Since the question specifies the exchange of bonds for stock, the correct term is 'conversion,' as this process directly involves converting bonds into equity.

Conclude the reasoning: Conversion is distinct from other methods of bond retirement because it changes the bondholder's role from creditor to shareholder, aligning with the description provided in the problem.