Forvarious reasons a corporation may issue warrants to purchase shares of its co

Question

Forvarious reasons a corporation may issue warrants to purchase shares of its common stock at specified prices that, depending on the circumstances, may be less than, equal to, or greater than the current market price. For example, warrants may be issued:

1. to existing stockholders on a pro rata basis

2. to certain key employees under an incentive stock-option plan

3. to purchasers of the corporation's bonds.

Questions for each of the three examples of how stock warrants are used:

(a) explain why they are used.

(b) Discuss the significance of the price (or prices) at which the warrants are issued (r granted) in relation to (1) the current market price of the company's stock, and (2) the length of tiem over which they can be exercised.

(c) Describe the information that should be disclosed in financial statements, or notes thereto, that are prepared when stock warrants are outstanding in the hands of the three groups listed above.

Explanation / Answer

According to FASB ASC 260-10-50-1 (Earnings Per Share

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.