GH is seeking to finance a substantial new project that is guaranteed to enhance the profitability of the entity. Its key determinants 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.
Which of the following financing options best meets these requirements?

• A. Redeemable preference shares
• B. Convertible loan stocks
• C. Initial public offering of ordinary shares
• D. A term loan

FG and RS operate in the same retail sector within the same country and are of a similar size. The following ratios have been calculated based on the financial statements for the year ended 30 September 20X4:

Which of the following factors would limit the usefulness of these ratios as a basis for assessing the comparative performances of FG and RS?

• A. RS operates at the low margin end of the market whilst FG operates at the high margin end.
• B. RS sold a piece of land for a sum much greater than its carrying value.
• C. RS has a higher level of borrowings and associated finance costs.
• D. FG has a higher level of deferred tax liabilities than RS.

Which THREE of the following actions should improve the cash position of an entity?

• A. Implementing an efficient inventory ordering system.
• B. Selling non current assets and leasing them back under operating leases.
• C. Offering extended credit terms to existing customers.
• D. Revising the depreciation policy of non-current assets.
• E. Revaluing all non-current assets.
• F. Substituting a bonus issue for the final dividend.

What is meant by the term "a placing of ordinary shares"?

• A. Selling new ordinary shares directly to the public.
• B. Selling new ordinary shares to a financial institution on a pre-arranged basis.
• C. Selling existing ordinary shares to new investors through a stock exchange.
• D. Selling new ordinary shares to existing shareholders.

AB and CD are competitors supplying components to the car manufacturing industry. AB operates in Country X and CD operates in Country Y.
Both entities were incorporated on the same day, are the same size and prepare financial statements to 31 March each year using international accounting standards.
Which of the following statements taken individually would limit the usefulness of the comparison of the return on capital employed ratio between the two entities?

• A. The average rate of inflation is 3% in Country X and 10% in Country Y.
• B. The average rate of borrowing is 2% in Country X and 7% in Country Y.
• C. The currency is Dollar in Country X and Krona in Country Y.
• D. The corporate tax rate is 25% in Country X and 40% in Country Y.