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Business Finance Section C

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Business Finance Section C

  • This topic has 1 reply, 2 voices, and was last updated 2 months ago by John Moffat.
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  • May 29, 2022 at 10:27 am #656776
    Anonymous
    • Topics: 29
    • Replies: 39
    • ☆☆

    Sir, I have 2 questions :
    1. In BPP Biz finance section C Bar Co, part D answer scheme explains the dangers of gearing by talking about the operating gearing. Is it acceptable for me to write about how higher gearing multiplies systematic risk of a share which raise cost of equity and the WACC ?

    2. Will doing a working through the use of cells ie. =C4*C5 rather than writing the whole thing down ie. TERP X no of shares get me full marks?

    May 29, 2022 at 3:26 pm #656796
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49902
    • ☆☆☆☆☆

    1. No. The question asks for discussion of the dangers of high gearing, and the answers discusses both operating gearing and financial gearing as required.
    (Also, although higher gearing will increase the riskiness of a share, and therefore the cost of equity, that does not automatically mean that the WACC will increase.)

    2. Yes. The marker is able to see what functions you have used in the spreadsheet.

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