Regarding bondholders vs. stockholders: Statement I: Bondholders face lower risk than stockholders. Statement II: Bondholders are lenders; stockholders are owners. Statement III: Bondholders are prioritized over stockholders in repayment. Which is correct

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Q: 78 (IAS/2025)
Regarding bondholders vs. stockholders:

Statement I: Bondholders face lower risk than stockholders.

Statement II: Bondholders are lenders; stockholders are owners.

Statement III: Bondholders are prioritized over stockholders in repayment.

Which is correct?

question_subject: 

General

question_exam: 

IAS

Statement I is correct because bondholders face lower risk than stockholders due to their higher claim on assets in bankruptcy. Statement II is correct as bondholders are lenders and stockholders are owners. Statement III is correct as bondholders are prioritized over stockholders in repayment. Statements II and III explain why Statement I is true.