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CIMAPRA19-F02-1 Exam - Topic 1 Question 57 Discussion

GH is seeking to finance a substantial new project that is guaranteed to enhance the profitability of the entity.Its keydeterminants in deciding upon the best source of finance are to balance the following requirements:1) to minimise the costs of issue of the finance;2) to avoid the need to find cash to repay the source of finance; and3) to ensure that the long-term gearing level does not increase.Whichof the following financing options best meets these requirements?
A) Convertible loan stocks
B) Initial public offering of ordinary shares
C) Redeemable preference shares
D) A term loan

CIMAPRA19-F02-1 Exam - Topic 1 Question 57 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 57
Topic #: 1
[All CIMAPRA19-F02-1 Questions]

GH is seeking to finance a substantial new project that is guaranteed to enhance the profitability of the entity.Its keydeterminants in deciding upon the best source of finance are to balance the following requirements:

1) to minimise the costs of issue of the finance;

2) to avoid the need to find cash to repay the source of finance; and

3) to ensure that the long-term gearing level does not increase.

Whichof the following financing options best meets these requirements?

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Suggested Answer: A

by Blondell at Aug 18, 2022, 04:02 PM

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Tijuana
10 months ago
IPOs can be expensive, not sure they minimize costs.
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Maybelle
10 months ago
Wait, are we sure this project is guaranteed to enhance profitability?
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Isabelle
10 months ago
A term loan seems risky with the gearing level.
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Levi
11 months ago
I think redeemable preference shares could work too.
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Cletus
11 months ago
Convertible loan stocks are a solid choice!
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Ronny
11 months ago
A term loan might have higher costs and repayment obligations, which doesn't really align with minimizing cash outflows.
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Alverta
11 months ago
Redeemable preference shares seem like they could avoid immediate cash repayments, but I worry about how they affect long-term gearing.
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Alpha
11 months ago
I'm not entirely sure, but I think an IPO could be costly and might not help with the gearing issue.
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Melinda
11 months ago
I remember that convertible loan stocks can be a good option since they can convert to equity later, which might help with cash flow.
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Graciela
11 months ago
Wait, I'm a bit confused. Is multi-connectivity per user equipment also one of the key factors? I know 5G has some cool new features, but I'm not 100% sure which ones specifically impact throughput capacity. I'll have to think this through carefully.
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Octavio
11 months ago
No problem, I've got this. The key is to focus on the details in each image and match them up with the descriptions. I'm confident I can get the right answer.
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