Warrants differ from listed options in that:
I. Exercise of warrants results in dilution of a firm's earnings per share.
II. When warrants are exercised, new shares of stock must be created.
III. Warrant exercise results in cash flows to the firm, whereas exercise of listed options does not.
A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

All three statements are true. Warrants are similar to options in many ways, but there are a few key differences. Warrant exercise results in the creation of new shares of stock, which can dilute a firm's earnings per share. Additionally, warrant exercise results in cash flows to the firm, unlike options exercise, which does not.

Warrants Differ from Listed Options in That