Asked by Jennifer Rivera Sierra on Feb 18, 2024
Verified
By issuing convertible debt,the entrepreneur will become the minority stockholder and lenders will assume control over how the company is run.
Entrepreneur
An individual or a group who creates something new—a new idea, a new item or product, a new institution, a new market, a new set of possibilities.
- Understanding the concept of convertible debt and its implications for entrepreneurs.
- Recognizing the potential impact of issuing convertible debt on the ownership structure of a company.
- Understanding the role of lenders in convertible debt and their potential influence on decision-making.
Verified Answer
MI
Mariam IbraheemFeb 18, 2024
Final Answer :
False
Explanation :
Convertible debt typically does not result in a change in control over the company. They are still considered debt, even if they can be converted into equity at a later time. However, if the entrepreneur is unable to repay the debt, the lenders may have the option to convert the debt into equity and may become majority stockholders in that scenario.
Learning Objectives
- Understanding the concept of convertible debt and its implications for entrepreneurs.
- Recognizing the potential impact of issuing convertible debt on the ownership structure of a company.
- Understanding the role of lenders in convertible debt and their potential influence on decision-making.
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