CIMA F3 Exam With Confidence Using Practice Dumps

Company ADE is an unlisted company; it needs to raise a significant amount of finance to fund future expansion. The directors are considering listing the company on the local stock exchange The following discussions have taken place between some of the directors:

Director A - We consider a public issue of bonds in the capital markets, we don't need to list to issue the bonds which will save time and money.

Director B - We should list on the Alternative Investment Market (AIM) and not the main market to avoid any regulatory requirements

Director C - We should remain unlisted; we can access an unlimited amount of equity finance through a rights issue

Director D - Listing will increase Company ADE's ability to raise new equity and debt finance in the future.

Director E - If we list, Company ADE will be a more likely target for a takeover than if we remain unlisted.

Which TWO of the directors' statements are correct?

A company generates and distributes electricity and gas to households and businesses.

Forecast results for the next financial year are as follows:

The Industry Regulator has announced a new price cap of $2.00 per Kilowatt.

The company expects this to cause consumption to rise by 15% but costs would remained unaltered.

The price cap is expected to cause the company's net profit to fall to:

A company has borrowings of S5 million on which it pays interest at 8%. It has an operating profit margin of 20%.

The company plans to increase borrowings by S2 million Interest on additional borrowings would be 10% and the operating profit margin would remain unchanged

A debt covenant attached to the new borrowings requires interest cover to be at least 4 times throughout the period of the borrowing

Interest cover is defined in the loan documentation as being based on operating profit

What is the minimum sales value required each year to avoid a breach of the interest cover covenant'