A bond-warrant package has different effects on the firm's cash flow and capital structure than a convertible bond.

Question

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A bond-warrant package consists of a bond and a bundled warrant, whereas a convertible bond is a bond that can be converted into stock. The bond-warrant package may have a dilutive effect on stockholders and may increase the firm's debt level without changing the number of outstanding shares. A convertible bond, on the other hand, may increase the number of outstanding shares and lower the firm's debt level if it is converted into stock. Therefore, the two instruments have different effects on a firm's financial position.

A Bond-Warrant Package Has Different Effects on the Firm's Cash