Convertible debt and straight debt issued with warrants are similar securities, because both are debt securities that represent potential equity claims on the issuer's assets. In fact, convertible debt can be thought of as straight debt plus nondetachable warrants. However, several important distinctions do exist. Use the following table to indicate whether the characteristic listed refers to convertible bonds or to stock warrants: Convertible Bonds Stock with Warrants O Characteristic These fixed-income securities remain as liabilities on the company's books after they are exercised. These fixed-income securities are exchanged for common stock and removed as liabilities from the company's books. These securities tend to have higher flotation costs. These securities tend to be issued by larger, less risky firms. O Do convertible securities aggravate or ease potential conflicts between bondholders and shareholders? Aggravate potential conflicts between bondholders and shareholders Ease potential conflicts between bondholders and shareholders