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1. i’m not sure how current assets were affected. why would current assets be increased by 1231 if there was a deduction of 1231. is it because we just assume assets were sold and we receive in cash terms leading to increase in current asset ?
2. in the option 2, why would paid up share capital be decreased partially ? shouldn’t whole sum decrease the called up share capital ??
Moreover, why would retained earning be affected if there’s remaining portion after paid up capital are deducted ?…3. in calculating EPS, how did the answer sheet get 6.2% and 0.65 ???
Additionally, in this kind of question where we calculate revised EPS, is there like a formula ??
how do we actually catch each hint in the question…..???’4. just by looking at the question, how do we know BBS Stores operate in retail industry ? since it only mentions about property industry…
5. how do we get 1130 and 2462 in the answer sheet ??….
1. If something is sold for 1231, then either cash or receivables will increase by 1231 and both of them are current assets!
2. Share capital is always the nominal value of the shares in issue. If shares are bought back, the the share capital reduces by the nominal value and the rest reduces retained earnings.
Both this and point 1 are basic financial accounting principles from your earlier exams (or whatever exempted you from the earlier exams) and not financial management learning!
3. The answer explains where the 6.2% comes from – it is LIBOR of 5.5% plus 70 basis points!). The 0.65 is to account for the tax at 35%. This does not require a formula – again it is basic financial accounting.
4. The examiner should have made this clear (it was the previous examiner, and many of his questions and/or answers were poor – that is why he is no longer the examiners!). However because he called the company BBS Stores he was expecting people to realise that they were ‘shops’, which was not fair.
5, Give me a clue by telling me which bit of the answer these numbers appear in. Please do not expect me to spend my Sunday evening looking through 4 pages of answer looking for these specific numbers!!!
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