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Capital structure and finance costs.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Capital structure and finance costs.

  • This topic has 3 replies, 2 voices, and was last updated 1 month ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • July 14, 2022 at 9:38 am #660452
    faysalciro
    • Topics: 4
    • Replies: 5
    • ☆

    When a company makes a rights issue of equity shares which of the following effects will the isue have?

    1 Assets are increased
    2 Retained earnings are reduced
    3 Share premium account is reduced
    4 Investment are increased

    ? 1 only
    ? 1 and 2
    ? 3 only
    ? 1 and 4

    The Correct answer is 1st option ( 1 only).
    But I don’t understand why not the last option (1 and 4). Investment is increased because share equity increased so why not?

    Correct answer is

    July 14, 2022 at 3:42 pm #660489
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 50053
    • ☆☆☆☆☆

    Share capital issued by the company is not called an investment.

    An investment would be if the company had bought shares in another company which is not the case here.

    July 14, 2022 at 10:44 pm #660535
    faysalciro
    • Topics: 4
    • Replies: 5
    • ☆

    Thank you very much.

    July 15, 2022 at 8:44 am #660570
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 50053
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
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