Using convertible debt instead of redeemable debt makes cash flow planning for the company harder.

Convertible debt can be converted into equity at the option of the bondholder, and the timing of this conversion can be uncertain. This makes cash flow planning more difficult because the company cannot be sure when or if the debt will be converted into equity, which would eliminate the need for cash outflows to service the debt.

On the other hand, with redeemable debt, the company knows exactly when the debt will be redeemed and can plan its cash flows accordingly. Therefore, using convertible debt instead of redeemable debt can make cash flow planning for the company more challenging.

Question

Using convertible debt instead of redeemable debt makes cash flow planning for the company harder.

Convertible debt can be converted into equity at the option of the bondholder, and the timing of this conversion can be uncertain. This makes cash flow planning more difficult because the company cannot be sure when or if the debt will be converted into equity, which would eliminate the need for cash outflows to service the debt.

On the other hand, with redeemable debt, the company knows exactly when the debt will be redeemed and can plan its cash flows accordingly. Therefore, using convertible debt instead of redeemable debt can make cash flow planning for the company more challenging.

Knowee AI · Accepted Answer

Using convertible debt instead of redeemable debt makes cash flow planning for the company harder.

Convertible debt can be converted into equity at the option of the bondholder, and the timing of this conversion can be uncertain. This makes cash flow planning more difficult because the company cannot be sure when or if the debt will be converted into equity, which would eliminate the need for cash outflows to service the debt.

On the other hand, with redeemable debt, the company knows exactly when the debt will be redeemed and can plan its cash flows accordingly. Therefore, using convertible debt instead of redeemable debt can make cash flow planning for the company more challenging.

Using convertible debt instead of redeemable debt makes cash flow planning for the company easier / harder.

Question

Using convertible debt instead of redeemable debt makes cash flow planning for the company easier / harder.

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