IIA Exam IIA-CIA-Part3-3P Topic 9 Question 41 Discussion

Actual exam question for IIA's IIA-CIA-Part3-3P exam

Question #: 41
Topic #: 9

[All IIA-CIA-Part3-3P Questions]

Which of the following is true of bond financing, compared to common stock, when all other variables are equal?

ALower shareholder control.

BLower indebtedness.

CHigher company earnings per share.

DHigher overall company earnings.

Show Suggested Answer

Suggested Answer: B

by Staci at Apr 21, 2024, 12:24 AM

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James

2 months ago

Ah, the old 'bond financing vs. common stock' question. I bet the answer involves something about leverage, but I can't remember which way it goes.

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Laura

1 months ago

C) Higher company earnings per share.

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Artie

1 months ago

B) Lower indebtedness.

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Corinne

1 months ago

A) Lower shareholder control.

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Lazaro

2 months ago

D? Really? That can't be right. Bond financing doesn't increase the overall earnings of the company, just how they're distributed.

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Ashlee

1 months ago

C) Higher company earnings per share.

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Timothy

2 months ago

B) Lower indebtedness.

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Oliva

2 months ago

A) Lower shareholder control.

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Arthur

3 months ago

I'm going to have to go with A on this one. Bond financing typically gives the bondholders less control than common shareholders would have.

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Edison

2 months ago

C) Higher company earnings per share.

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Winifred

2 months ago

That's correct. Bond financing does indeed result in lower shareholder control.

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Selma

2 months ago

A) Lower shareholder control.

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Tayna

3 months ago

I'm pretty sure B is the right answer. Bond financing generally leads to lower indebtedness compared to common stock, all else being equal.

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Bok

3 months ago

Hmm, if I had to guess, I'd say C is the correct answer. Bond financing typically results in higher earnings per share, since the interest payments are deductible.

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Ezekiel

2 months ago

Yes, bond financing usually leads to higher earnings per share because of the tax advantages.

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Stephane

3 months ago

I think you're right, C does seem like the correct answer.

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Makeda

4 months ago

But wouldn't bond financing lead to higher indebtedness, making B) a more likely answer?

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Telma

4 months ago

I disagree, I believe it's C) Higher company earnings per share.

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Makeda

4 months ago

I think the answer is A) Lower shareholder control.

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