Refer to the Annual report appendix and determine the times interest earned ratio for 2003 for The Limited. Use “operating income” to represent IBIT. Prepare written comments on the results of your analysis. Annual report analysis E A recent annual report of Emhart Corporation contained the following paragraph in its notes to the financial statements: The 6 3/4 percent convertible subordinated debentures may be converted into shares of common stock at a price of USD 26.50 per share at any time prior to maturity. They are redeemable at prices decreasing from 105 percent of face amount currently to 100 percent [at a certain future date].
Answer the following questions:
a. If you held one USD 1,000 bond, how many shares of stock would you receive if you converted the bond into shares of stock? (Hint: You can use the principal amount of the bond to buy shares of stock at the stated price.)
b. Assume you held one USD 1,000 bond and the bond was called by the company at a price of 105 percent of the face amount. If the current market price per share of the stock was USD 29, would you convert the bond into shares of stock or would you surrender the bond? Explain.