General Studies · Convertible Bonds and Capital Structure
Convertible Bonds are hybrid financial instruments that combine features of both debt and equity. Which of the following statements is true regarding the impact of Convertible Bonds on a bank's capital structure and financial ratios?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1These bonds can never be issued by banks as they are strictly prohibited by the Basel III capital adequacy framework.
- 2Upon conversion, the bank's equity base expands, which may lead to the 'Dilution' of Earnings Per Share (EPS).✓
- 3Before conversion, they are treated as pure equity in the balance sheet and have no impact on the bank's leverage ratio.
- 4Upon conversion, the bank's debt increases and the interest burden also increases, leading to lower profitability.
Correct answer
Upon conversion, the bank's equity base expands, which may lead to the 'Dilution' of Earnings Per Share (EPS).
Download Single Question PDF
Save this question and verified answer as a clean study sheet with live clickable link.
👥
Share with Friends & Study Groups
Challenge your peer aspirants on WhatsApp or Telegram to solve this question!
Online Test Series
Start Free Mock Test →Preparing for General Studies?
Practice full-length mock tests with real exam timers, instant score analysis, and all-India ranking.
Chapter Practice
Practice Convertible Bonds and Capital Structure MCQs →Want more practice questions on Convertible Bonds and Capital Structure?
Solve complete topic-wise tests with detailed solutions on GkGet.
Related Practice Questions
Recommended practice questions in General Studies · Convertible Bonds and Capital Structure