CFA Practice Question

There are 86 practice questions for this study session.

CFA Practice Question

Credit investors may use financial information to make economic decisions, including ______

I. determining the creditworthiness of a company.
II. assigning a debt rating to a bond issue.
III. valuating a stock for making an investment recommendation to others.
IV. examining compliance with debt covenants or other contractual arrangements.
A. I, II, III and IV
B. I, II and III
C. I, II and IV
Explanation: III is mainly for equity investors (or their analysts).

User Contributed Comments 8

User Comment
CFADru Yeah, okay. Ladies and gentlemen, after pouring over the financial statements of ABC company, I cannot tell if my earning growth projections from last year when initally valuating the security have held up or not. Therefore, please continue to support my initial valuation of said security. Thank you and I look forward to continue to serve you.
bobert I am not sure, but I take it you got it wrong by the sarcastic remarks? Valuation is very important, but for a creditor, who will have priority in liquidation, what do they really care if the stock is not valued properly? They do care however if the company is financially stable, and is credit worthy, or if it is adhering to the bond covenants. Do you see the difference?
Xocrevilo I agree with you Bobert, but the extent to which the CFA often tests our semantic understanding, rather than practical knowledge is consistently irritating (for both CFADru and myself)!
Micha In practice credit investors do not use this information to value the stock although it COULD be used. The semantic in the question is "may use". As a result the question is right.
StanleyMo yeah, "credit" is the keyword
sungkhac Up, the "credit", that's the key, mie
bvides Ohhhhhh...ya CREDIT...A dahh
gyee2012 "Credit" Think of bank providing a loan
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