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The directors of AB want to reduce the entity's gearing ratio in the year to 31 December 20X9.
Which of the following independent actions could the directors take during 20X9 to achieve this?
Suggested Answer: A
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31 comments · newest first
MA
Malika
11 months ago
Not sure about A, isn't that just accounting magic?
VI
Vicky
11 months ago
B and C are solid options for raising capital without debt!
MA
Martin
11 months ago
Wait, can switching to variable really reduce gearing?
HE
Herschel
12 months ago
Totally agree, D could help lower interest costs too.
DA
Darci
12 months ago
A is a good move, it boosts asset values!
RE
Rene
1 year ago
I vaguely recall that redeemable preference shares might reduce gearing because they can be treated differently than regular debt, but I’m not completely confident about that.
HE
Hester
1 year ago
I practiced a question like this, and I feel like switching to lower variable rate borrowing might actually increase risk, which could be counterproductive for gearing.
SU
Sunshine
1 year ago
I think issuing cumulative preference shares could help because it might not increase debt in the same way as loans do, but I need to double-check how they impact the gearing ratio.
SH
Shaun
1 year ago
I remember gearing ratios are affected by debt levels, so reducing debt would help, but I'm not sure how recognizing a surplus would fit in.
TH
Theron
1 year ago
Okay, I think I've got this. Recognizing a valuation surplus would increase equity, which would lower the gearing ratio. Issuing preference shares would increase debt, so that's not the right approach. Switching to variable rate borrowing could also help, as it may reduce the overall debt level.
DI
Dick
1 year ago
Hmm, I'm a bit unsure about this one. Recognizing a valuation surplus, issuing preference shares, and switching to variable rate borrowing - I'll have to carefully consider how each of these would affect the gearing ratio.
JO
Jolanda
1 year ago
This seems like a straightforward question about reducing gearing ratio. I'll need to think through the different options and how they would impact the balance sheet.
AD
Adelle
1 year ago
This is a good test of my understanding of gearing ratio and how to manage it. I'll need to think through the pros and cons of each option to determine the best approach for reducing the ratio.
LA
Lashunda
1 year ago
Hmm, I'm a bit confused by the namespace declaration. I'll need to review my notes on XML Schema namespaces to make sure I understand this properly.
VA
Vallie
1 year ago
The key here is understanding the purpose of the 'design and transition' value chain activity. I'll focus on that to try to eliminate the incorrect answers.
VI
Vincent
1 year ago
Ah, the age-old dilemma: should I go with the safe and boring option, or take a chance on something more exciting? I'll have to think this one over with a nice cup of tea.
VA
Valentine
1 year ago
Wow, this is a tough one. I'm torn between A and D. Maybe I should just flip a coin and hope for the best!
FI
Fidelia
1 year ago
Redeemable preference shares? Sounds like a risky move. I think I'll play it safe and go with the variable rate borrowing.
JO
Jospeh
1 year ago
Switching to a lower variable rate borrowing seems like a safe bet to reduce the gearing ratio.
LA
Latrice
1 year ago
I think recognising the valuation surplus on property, plant, and equipment could also help reduce the gearing ratio.
CH
Cheryll
1 year ago
I agree, redeemable preference shares do seem risky. I would also go with the variable rate borrowing.
AN
Anjelica
1 year ago
Issuing preference shares could work, but I'm not sure if that's the best approach. Option D looks more promising to me.
RE
Rebbecca
1 year ago
Switching fixed interest bearing borrowing to a lower variable rate borrowing sounds like a solid plan.
CA
Carmelina
1 year ago
I agree, but issuing redeemable preference shares might also be a good option.
FR
Frank
1 year ago
I think recognizing the valuation surplus on property, plant, and equipment could help.
LA
Lauran
2 years ago
Recognizing the valuation surplus seems like a straightforward way to reduce the gearing ratio. I'll go with option A.
LA
Laila
1 year ago
I think issuing redeemable preference shares could also be a good option to consider.
NA
Nan
1 year ago
I agree, recognizing the valuation surplus would definitely help reduce the gearing ratio.
AL
Alpha
2 years ago
But wouldn't recognising the valuation surplus on property, plant, and equipment also help in reducing gearing ratio?
AR
Aracelis
2 years ago
I agree with Coleen, switching to a lower variable rate borrowing would decrease the interest expense.
CO
Coleen
2 years ago
I think option D could help reduce the gearing ratio.