Question : Conversion of debentures into equity shares by a financing company will result in inflow, outflow or no flow of cash.
Option 1: Inflow of cash
Option 2: Outflow of cash
Option 3: No flow of cash
Option 4: Cash and cash equivalents
Answer (1)
21st Jan, 2024
Correct Answer: No flow of cash
Solution : Answer = No flow of cash
No flow of cash conversion of debentures into equity shares at the time of redemption neither inflow nor outflow of cash. Conversion of debentures into equity shares does not involve any cash transaction; hence, it results in no flow of cash. It's a mere exchange of securities, impacting the composition of the company's capital structure without affecting its cash position.
Hence, the correct option is 3.
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