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CIMAPRA19-F02-1 Exam - 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?

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Suggested Answer: A

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

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Malika
3 months ago
Not sure about A, isn't that just accounting magic?
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Vicky
3 months ago
B and C are solid options for raising capital without debt!
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Martin
3 months ago
Wait, can switching to variable really reduce gearing?
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Herschel
4 months ago
Totally agree, D could help lower interest costs too.
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Darci
4 months ago
A is a good move, it boosts asset values!
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Rene
4 months 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.
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Hester
4 months 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.
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Sunshine
4 months 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.
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Shaun
5 months 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.
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Theron
5 months 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.
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Dick
5 months 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.
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Jolanda
5 months 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.
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Adelle
5 months 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.
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Lashunda
5 months 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.
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Vallie
5 months 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.
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Vincent
9 months 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.
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Valentine
10 months 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!
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Fidelia
10 months ago
Redeemable preference shares? Sounds like a risky move. I think I'll play it safe and go with the variable rate borrowing.
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Jospeh
8 months ago
Switching to a lower variable rate borrowing seems like a safe bet to reduce the gearing ratio.
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Latrice
8 months ago
I think recognising the valuation surplus on property, plant, and equipment could also help reduce the gearing ratio.
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Cheryll
8 months ago
I agree, redeemable preference shares do seem risky. I would also go with the variable rate borrowing.
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Anjelica
10 months 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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Rebbecca
9 months ago
Switching fixed interest bearing borrowing to a lower variable rate borrowing sounds like a solid plan.
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Carmelina
9 months ago
I agree, but issuing redeemable preference shares might also be a good option.
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Frank
9 months ago
I think recognizing the valuation surplus on property, plant, and equipment could help.
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Lauran
10 months 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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Laila
9 months ago
I think issuing redeemable preference shares could also be a good option to consider.
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Nan
10 months ago
I agree, recognizing the valuation surplus would definitely help reduce the gearing ratio.
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Alpha
11 months ago
But wouldn't recognising the valuation surplus on property, plant, and equipment also help in reducing gearing ratio?
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Aracelis
11 months ago
I agree with Coleen, switching to a lower variable rate borrowing would decrease the interest expense.
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Coleen
11 months ago
I think option D could help reduce the gearing ratio.
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