CIMA Exam CIMAPRA19-F02-1 Topic 5 Question 95 Discussion

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

Question #: 95
Topic #: 5

[All CIMAPRA19-F02-1 Questions]

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?

ARecognise the valuation surplus on AB's property, plant and equipment.

BIssue cumulative preference shares.

CIssue redeemable preference shares.

DSwitch AB's fixed interest bearing borrowing to a lower variable rate borrowing.

Show Suggested Answer

Suggested Answer: A

by Isadora at Aug 24, 2024, 10:51 PM

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7 days ago

Issuing preference shares could work, but I'm not sure if that's the best approach. Option D looks more promising to me.

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23 days ago

Recognizing the valuation surplus seems like a straightforward way to reduce the gearing ratio. I'll go with option A.

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11 days ago

I agree, recognizing the valuation surplus would definitely help reduce the gearing ratio.

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29 days ago

But wouldn't recognising the valuation surplus on property, plant, and equipment also help in reducing gearing ratio?

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30 days ago

I agree with Coleen, switching to a lower variable rate borrowing would decrease the interest expense.

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1 months ago

I think option D could help reduce the gearing ratio.

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