Stock options, rights, and warrants are different from convertible securities in that they:
A) Typically increase cash upon exercise.
B) Usually reduce total assets upon exercise.
C) Often reduce liabilities upon exercise.
D) Normally increase retained earnings upon exercise.

Question

Quizplus · Accepted Answer

Convertible securities can be converted into common equity, whereas stock options, rights, and warrants are already contracts that allow the holders to buy common equity at a predetermined price. When these contracts are exercised, cash is typically paid to the company in exchange for the common equity, which increases the company's cash balance.

Stock Options, Rights, and Warrants Are Different from Convertible Securities