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Why are they not shown? Are they not included within earnings and we have to exclude them?
If there are too many questions, kindly respond only to the more serious ones, specifically those where I am making logical blunders…
Much thanks for your time!
Thank you very much for your very comprehensive reply!
I truly appreciate it!
I would ensure that I add the relevant year/attempt from which I have borrowed the question in the future.
The complete sentence is: Financing of the company via equity alone is not consistent with maximising shareholder wealth, since it deprives shareholders of the benefits of debt finance, which is cheaper than equity.
Maybe they mean that it is cheaper to avail debt finance like buying loan notes is cheaper for financiers in comparison to buying shares in a company??
Is my assumption correct?
How does buyback schemes work? Like if i am a director and i know i will receive shares as bonus on 1st jan. Then, i will buy back a huge chunk of company’s share capital on 31st Dec so the denominator (total shares in issue) falls, EPS rises and share price rises for me to profit from it.
RIGHT? but don’t they get caught?
Hello, thank you for your response!
I truly appreciate it.
In the same question, the auditor’s response is:
Perform a review of after-date purchase invoices to determine if any relate to the current year. If any do relate to the current year, agree them to the accruals listing.
Does this mean that as auditor, we have to assess if any purchases were received by the company during the year but paid for later after the year-end. So we check the post year-end invoices and if we find that item A was paid for after year end (but delivered by supplier before year end), we strike it off the accruals list??
Is this what’s happening??
Also, I hope that you have a wonderful holiday.
Hi Sir!
I hope you are doing well. I have the following issues regarding your answer.
Questions regarding your answer
“POSSIBLY you are referring to the fact that there is an ‘effective’ rare of interest as well as an actual rate.”
* What is the actual rate of interest? There is only one rate of interest given in the question. I don’t understand this.
QUERY 2
The effective rate is used to calculate the finance cost but, of course, only the face rate of the debt is actually paid.
* I don’t understand what you mean by only the face rate of the debt being paid. What is the face rate here? 125,000 $ which is going to SPL?
QUERY
* The difference between effective interest and actual interest is credited to the loan account ready for it to be repaid at a premium sometime in the future.
I don’t understand. Can you explain?
I have watched OT lectures on borrowing costs but am still facing difficulties. In this question I don’t understand why we capitalize some of the yearly interest expense but not other two months.
Thank you !