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11 months ago
Explain why a company would want to classify a financial instrument as debt instead of equity?
Textbook 
Intermediate Accounting, Volume 2
Edition: 5th
Authors:
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wrote...
11 months ago
Many companies want to classify financial instruments as equity and not debt in order to
improve their debt-to-equity. By recording certain items as equity, they will avoid possible
loan covenant problems. In addition income is affected by the retirement and interest
payments if the item is classified as debt.
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11 months ago
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11 months ago
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