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Basic Question 6 of 6
A company can benefit from callable common shares because it ______
II. can reduce dividend payments.
III. facilitates raising capital when issuing such shares.
I. can buy back the shares at a lower price and sell them at a higher price.
II. can reduce dividend payments.
III. facilitates raising capital when issuing such shares.
User Contributed Comments 4
| User | Comment |
|---|---|
| Shaan23 | Why is III incorrect. If a company sells a callable common share to an investor it will raise capital. |
| vatsal92 | Shaan23: They are asking the scenario after such shares are issued and subsequently called back. |
| CFAToad | Also, callable shares represent risk to the shareholder, as the corporation can place a ceiling on gains. So the security will be less valuable, decreasing access to capital. But it would also serve to protect current shareholders by decreasing dilution. |
| khalifa92 | III. is for putable options the company give u 10$ share u give it back 5$ share cheap capital |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
describe differences in voting rights and other ownership characteristics among different equity classes
CFA® 2024 Level I Curriculum, Volume 3, Module 4.