Absolute Free CIMAPRO19-F02-1-ENG Exam Practice for Comprehensive Preparation 

GG's gearing is currently 50% compared to the industry average of 40% (both measured as debt/equity). GG's debt is all in the form of a single bank loan that is repayable in five years' time. The directors of GG are seeking to raise finance for a new project and they are considering an additional bank loan from the same bank.

Which of the following would prevent the bank from lending the finance for the project in the form of a new bank loan?

W and Y are very similar entities with the same level of profit before interest and tax. However, W has gearing of 95% and Y has gearing of 30%.

Which of the following statements is true?

RST sells computer equipment and prepares its financial statements to 31 December.

On 30 September 20X5 RST soldcomputer software along with a two year maintenance package to a customer. The customer is given the right to return the goods within six months and claim a full refund if they are not satisfied with the computer software. The risk of return is considered to be insignificant for RST.

How should the revenue from this transaction and the right of return be recognised in thefinancial statements for the year ended 31 December 20X5?

Information from the financial statements of an entity for the year to 31 December 20X5:

The gearing ratio calculated as debt/equity and interest cover are: