Question 1

Information from the financial statements of an entity for the year to 31 December 20X5:

The gearing ratio calculated as debt/equity and interest cover are:

Options :

A : gearing of 15% andinterest cover of 6.

B : gearing of 16% and interest cover of 6.

C : gearing of 15% and interest cover of 4.

D : gearing of 16% and interest cover of 4.

Answer: A

Question 2

When establishing a group structure, which of the following factors need to be considered: Select ALL that apply.

Options :

A : Whether control has been established

B : The percentage ownership

C : The date of acquisition

D : Non-controlling interests

E : Goodwill

F : Intra-group investments

G : Whether control is direct or indirect

Answer: A,B,C

Question 3

Whatis meant by the term 'a placing of ordinary shares'?

Options :

A : Selling new ordinary shares to a financial institution on a pre-arranged basis.

B : Selling new ordinary shares directly to the public.

C : Selling existing ordinary shares to new investors through a stock exchange.

D : Selling new ordinary shares to existing shareholders.

Answer: A

Question 4

How would KL account for itsinvestment in MNin its consolidated financial statements for the year to 31 December 20X9?

Options :

A : Joint venture

B : Joint arrangement

C : Financial asset

D : Subsidiary

Answer: A

Question 5

An entity undertakes an issue of new debt which has the effect of reducing the entity's weighted average cost of capital (WACC).

Which of the following would best explain why the WACC will have fallen?

Options :

A : The entity was 100% equity financed prior to the issue of the debt.

B : The risk to the shareholders has reduced leading to a fall in the cost of equity.

C : The new debt is being used to replace existing debt that had a lower cost.

D : The new debt is being used to replace existing debt that had the same cost.

Answer: A

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