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

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?
C) A placing will increase the proportion of the total number of MNO's shares held by large investors.
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.
D) The directors must use a placing before offering the rights issue to existing shareholders.

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

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 45
Topic #: 1
[All CIMAPRA19-F02-1 Questions]

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?

Show Suggested Answer Hide Answer
Suggested Answer: C

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

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Huey
10 months ago
I thought they could do a rights issue first, not sure about the order.
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Sage
10 months ago
Placing definitely increases large investors' shares, that's a fact.
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Janine
11 months ago
Wait, are we sure a placing is more expensive? Sounds off.
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Galen
11 months ago
Totally agree, rights issues are more straightforward!
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Estrella
11 months ago
A rights issue usually has lower admin costs than a placing.
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Tonette
11 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
11 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
11 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
11 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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