CFA Level I · CFA Level I Exam · Investors and Other Stakeholders
Which feature is most likely a characteristic of a non-profit organization that issues bonds?
A non-profit bond issuer most likely retains surplus cash flows to fund its mission instead of distributing them to owners. It has no equity holders entitled to dividends, and bondholders are creditors who do not vote on board elections.
- ASurplus cash flows are retained for its mission rather than distributed to ownersCorrect
- BBondholders obtain voting rights in the election of the board of directors
- CEquity investors receive dividends from annual surpluses
Explanation
Non-profit issuers have no equity owners, so surpluses are reinvested in the mission rather than paid out as dividends. Bondholders are creditors without voting rights over the board, and there are no equity investors to receive dividends.
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