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It states in the question that the corporate debt, is assumed to be risk-free and has a gross
redemption yield of 11 %.
This indicates that the debt is considered to have a very low likelihood of default, meaning that the issuer is expected to meet its obligations to pay interest and repay the principal.
So that’s why it is assumed to be risk free as the assumption is often made for certain types of corporate debt, particularly when the company has a strong credit rating or when the debt is backed by secure assets.So where the overdraft rate is 40%, you should consider using the Effective Annual Rate for comparison, especially since that accounts for the effects of compounding, which can provide a more accurate representation of the cost of not taking the discount.
But remember, if the question does not explicitly mention the need to apply the Effective Annual Rate using the Simple Annual Rate can still be acceptable in the question. The key is to ensure that the chosen method aligns with the context of the question. If it’s not clear I would say either would be acceptable if it is clear then ATQ set..
When calculating the cost of rejecting a discount, as in the case of Scrimpy Co, the Simple Annual Rate can be used effectively. The calculation involves determining the cost of not taking the discount over the period it is offered, and since the question does not specify the need for an EAR, the Simple Annual Rate is a valid approach.
It is important to note that using the EAR can provide a more accurate representation of the cost when compounding is involved. The choice between the two methods may lead to different results, and compounding typically results in a higher effective rate, but if the question does not specify the use of EAR, it is generally acceptable to use the Simple Annual Rate.m
Well, what can I say, congratulations on passing FM with such a great score.
I am glad you like what open tuition is about, and I am very happy to hear my support helped you achieve your exam pass.
We try to answer questions as soon as they are raised and with as much clarity and detail, as is required.
Thank you for your kind words of appreciation to what we do.Factoring is considered the best option for improving the accounts receivable turnover ratio because it typically leads to a reduction in the receivables collection period.
When a company enters into a factoring agreement, it sells its receivables to a finance company, which then takes over the responsibility of collecting payments from customers. This can result in faster cash inflows and a decrease in the average accounts receivable balance on the financial statements.
By reducing the level of receivables, the accounts receivable turnover ratio, calculated as Sales divided by Accounts Receivable, will increase.
Whilst I agree with your comment, the effectiveness of factoring often lies in the factor’s expertise in managing collections, which then can lead to improved cash flow and reduced administrative burdens for the company.
But the primary benefit is the immediate impact on the receivables balance and the associated turnover ratio.Good question
Usually it is a range of answers so something between 102.5 and 102.7 for example
Or 102.45 and 102.75 could be another range.Real exam questions will clearly tell you to one, or two decimal places or another could say rounded to the nearest whole number.
If there is scope for a range of numbers then the answer will accept such a range.Text books are produced by various writers and unfortunately without a standard format of answers. Don’t get too worried about textbook answers please.
I hope this puts your mind at rest.
You will have to contact the ACCA yourself
It’s very difficult for us to comment on individual students or provide advice since we are not involved in the process.https://www.accaglobal.com/uk/en/footer-toolbar/contact-us.html
Yes, declared dividends are considered current liabilities because one a company declares a dividend, it becomes a legal obligation to pay that amount to shareholders. Must settle within the current accounting period, typically within one year, which is why it is classified as a current liability on the balance sheet.
With investment appraisal we refer to time periods as T
T0 is today, so what happens at the start of the project or appraisal
Their could be buying a machine and say working capitalThen T1 is the end of the first year and the start of the next….. so revenue and costs for the first year
Then T2 is the end of the next year so revenue and costs for the second year and so on
There have been no real amendments 2022-2023-2024-2025
B implies a broader approach where both output levels and costs are set in advance, and actual results are compared against these predetermined figures.
Whilst C specifically emphasises that the comparison is made strictly between actual costs incurred and the predetermined costs that correspond to the actual level of activity, which is a key aspect of standard costing.
Please could you clarify what you are asking
If you mean watching the videos, do they apply to future sittings of exams then yes they do.
There has been very few changes which you can see for yourselfA shadow price associated with a resource tells you how much more profit you would get by increasing the amount of that resource by one unit.
An easy way to think about it is ……. Well how much you would be willing to pay for an additional resource?
For exampleA company uses linear programming to decide on the production and sales budget that will maximise total contribution and profit for a financial period. The optimal solution involves using all available direct labour hours, for which the shadow price is $4.50 per hour, and machine hours, for which the shadow price is $3 per machine hour. Direct labour is paid $8 per hour.
If the objective of the company is to maximise total contribution and profit in each period, how much should the company be willing to pay per hour to obtain additional direct labour hours of production capacity?A .Up to but not including $4.5
B. Up to but not including $9.5
C. Up to but not including $12.5 ******This means that the company would increase contribution by paying up to $(8 + 4.50) = $12.50 see below for an explanation
D. Up to but not including $15.5If they could buy one extra hour at the ‘normal’ price of $8 then we would make the ‘normal’ contribution which would mean an extra $4.50. But given that extra hours will cost more than $8 per hour (otherwise the hours would not be limited), for each extra $1 they cost the extra contribution will be reduced by $1.
If the extra cost was $4.50 per hour then the extra contribution would be $0 and so the most extra they will be prepared to pay above the normal cost is $4.50.The reason the perpetuity dividend from T3 is not discounted back to T3 but rather to T2 in the present value formula is due to the timing of cash flows.
The cash flow from the project, which is worth 11c, occurs at T2. Therefore, the total cash flow at T2 is 10c div plus 11c proj return, so 21c at T2.
To calculate PV the perpetuity starting from T3 is considered to begin at T2 because the dividends from T3 onward are based on the assumption that the firm will continue to pay the regular dividend of 10c each year indefinitely.
The formula reflects this by disc the perpetuity back to T2, not T3, thus cash flows are being evaluated at T2. So the cash flow at T2 is 21c, which is discounted back to T0.
The perpetuity starting from T3 is calculated as 10c/0.1, which is also discounted back to T2.This is why the PV formula uses T2 as a ref point for both cash flows. The delayed dividend refers to the T1 dividend that was not paid, but the cash flows from T3 are still evaluated based on the cash flow structure starting from T2.
Yes, it does
These interactive resources are designed to help students familiarise themselves with the exam format and the software used during the exams.But I also recommend practicing by using the specimen CBE exams available on the ACCA website to gain confidence in answering questions in the computer-based format.
Sorry unfortunately I am not prepared to discuss the exam or exam questions
Until I see it for myself or that I am confident you have understood the question or have the right information.
It wouldn’t be professional of me to answer what you think the question was on.Both books are absolutely brilliant
In fact BPP the new interactive BPP texts are rather super!!In our opinion they are. (You may also want a textbook to use for background reading).
What we do well is we explain the theory behind and use of various equations, theories etc.
Hopefully you will find us enthusiastic about the subject.There is the facility to ask the tutor questions and AI function to use when you need it.
