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CIMA Exam CIMAPRA19-F02-1 Topic 3 Question 104 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 104
Topic #: 3
[All CIMAPRA19-F02-1 Questions]

W and Y are very similar entities with the same level of profit before interest and tax. However, W has gearing of 95% and Y has gearing of 30%.

Which of the following statements is true?

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Suggested Answer: A, B, C, D

by Yuriko at Dec 07, 2024, 02:32 AM

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Jess
3 months ago
I'm just gonna go with A) and hope the examiner has a good sense of humor. After all, 95% gearing? That's like playing financial Russian roulette!
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Tammi
2 months ago
Let's hope the examiner appreciates our humor.
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Ricki
2 months ago
Yeah, 95% gearing does sound risky.
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Vicki
2 months ago
I think A) is the safest bet here.
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Kara
3 months ago
B) A greater proportion of profit will be available out of which to declare a dividend in W. Hmm, I don't think so. The high gearing in W means more of the profits will go towards servicing the debt, leaving less for dividends.
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Micheal
3 months ago
D) Y has a greater commitment to meet interest payments than W. Haha, nice try, but no. The high gearing of 95% in W actually means it has a greater commitment to meet interest payments, not Y.
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Alana
4 months ago
C) Investors in Y will expect a higher return than investors in W. This makes sense, as Y has lower gearing and hence lower risk, so investors would expect a lower return.
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Blythe
2 months ago
D) Y has a greater commitment to meet interest payments than W.
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Gerald
3 months ago
B) A greater proportion of profit will be available out of which to declare a dividend in W.
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Rashad
3 months ago
A) Investing in W carries a higher level of risk than investing in Y.
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Julio
4 months ago
A) Investing in W carries a higher level of risk than investing in Y. This is clearly the correct answer. The high gearing of 95% in W means it has a much higher debt burden, making it a riskier investment.
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Nieves
3 months ago
User 3: D) Y has a greater commitment to meet interest payments than W.
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Nguyet
3 months ago
User 2: B) A greater proportion of profit will be available out of which to declare a dividend in W.
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Glory
3 months ago
User 1: A) Investing in W carries a higher level of risk than investing in Y.
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Coral
4 months ago
I think investors in Y will expect a higher return than investors in W.
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Cathrine
4 months ago
I disagree, I believe a greater proportion of profit will be available out of which to declare a dividend in W.
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Kathrine
4 months ago
I think investing in W carries a higher level of risk than investing in Y.
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