CIMAPRA19-F02-1 Exam - Topic 1 Question 45 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 45
Topic #: 1

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?

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

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

CA placing will increase the proportion of the total number of MNO's shares held by large investors.

DThe directors must use a placing before offering the rights issue to existing shareholders.

Show Suggested Answer

Suggested Answer: C

by Kristel at May 09, 2022, 08:05 AM

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Huey

4 months ago

I thought they could do a rights issue first, not sure about the order.

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Sage

4 months ago

Placing definitely increases large investors' shares, that's a fact.

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Janine

4 months ago

Wait, are we sure a placing is more expensive? Sounds off.

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Galen

4 months ago

Totally agree, rights issues are more straightforward!

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Estrella

5 months ago

A rights issue usually has lower admin costs than a placing.

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Tonette

5 months ago

This is a good opportunity to showcase my knowledge of internal audit principles. I'll methodically go through each option and evaluate which three are truly the most essential elements.

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Rosina

5 months ago

I'm a bit confused by this question. Is FinOps really just about using data to make cost-saving decisions, or is it something more specific to the financial industry? I'll have to review my notes to be sure.

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Oretha

5 months ago

I think it could be C too, but I have a nagging feeling that D makes sense as well, especially with expectations influencing decisions.

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Glenna

5 months ago

Ugh, these IT terms can get so confusing sometimes. Let me re-read the question and think it through step-by-step. I know RPO has something to do with data loss, so that's probably the best answer here.

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