Question 1

Information from the financial statements of RST for the year ended 30 April 20X9 is as follows:

At 30 April 20X9 the ordinary shares are trading at $4.75.

What is the price earnings (P/E) ratio for RST at 30 April 20X9?

Options :

A : 15.83

B : 7.92

C : 10.56

D : 9.31

Answer: A

Question 2

When accounting for a finance lease under IAS 17 Leases, which TWO of the following are recognised in the statement of profitor loss?

Options :

A : Finance cost element of the lease payments

B : Depreciationof the leased asset

C : Lease payments paid

D :

Lease payments payable

E : Capital repayment element of the lease payments

Answer: A,B

Question 3

RS has issued an instrument with a nominal value of $1 million, at a discount of 2.5%, and a coupon rate of 6%. The terms of the issue are that the instrument must eitherbe redeemed at par, at the option of the holder, in three years' time, or alternativelyconverted into equity shares in RS.

The characteristics of this instrument taken as a whole indicates that it would be classifed as which of the following?

Options :

A : Compound instrument

B :

Debt instrument

C : Equity instrument

D : Discounted instrument

Answer: A

Question 4

Ratios have been produced below for EF for the year to 31 March:

Which TWO of the following could explain themovement in both gearing and ROCE?

Options :

A : A rights issue on 31 March 20X3.

B : A debt issue on 31 March 20X3.

C : A revaluation upwards on the head office property on 1 April 20X2.

D :

A bonus issue of shares on 1 April 20X2.

E : A bank loan to purchase new machinery on 31 March 20X3.

Answer: A,C

Question 5

MNO is listed on its local stock exchange. It has a high level of gearing compared to the industry average as a result of rapid expansion funded by debt. The directors of MNO would like to reduce the level of gearing by raising equity to fund the next expansion project. The directors are considering whether to use a placing of new shares or a rights issue.

Which of the following statementsis true?

Options :

A : A rights issue would not need to be underwritten because the risk of the shares not being taken up is small compared to a placing.

B : The administration costs associated with a placing are usually more expensive than a rights issue because less investors are involved.

C : A placing will increase the proportion of the total number of MNO-s shares held by large investors.

D : The directors must use a placing before offering the rights issue to existing shareholders.

Answer: C

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