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F2 Exam Dumps : F2 Advanced Financial Reporting

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F2 Advanced Financial Reporting Questions and Answers

Question 1

RS has issued an instrument with a nominal value of $1 million, at a discount of 2.5%, and a coupon rate of 6%. The terms of the issue are that the instrument must either be redeemed at par, at the option of the holder, in three years' time, or alternatively converted into equity shares in RS.

The characteristics of this instrument taken as a whole indicates that it would be classifed as which of the following?

Options:

A.

Compound instrument

B.

Debt instrument

C.

Equity instrument

D.

Discounted instrument

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Question 2

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

Options:

A.

Selling new ordinary shares to a financial institution on a pre-arranged basis.

B.

Selling new ordinary shares directly to the public.

C.

Selling existing ordinary shares to new investors through a stock exchange.

D.

Selling new ordinary shares to existing shareholders.

Question 3

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?

Options:

A.

A covenant on the existing bank loan that restricts the level of dividend that can be paid.

B.

A projected decrease in interest cover that would breach a covenant on the existing loan.

C.

The revaluation of GG's property that shows an increase in its value since the existing bank loan was taken out.

D.

A projected lack of profits to be able to claim tax relief on the additional interest arising from the new loan.