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thanks for your reply Mike, as I worked through the question I found the 1500 paid out in loan note interest paid on the TB,
so then realised( i think) this was the 30,000 x 5% !To try to get a further understanding of this, the question states that the loan notes could be converted to 25 shares per 100$ or redeemed at Par? what would this mean if it then converted to shares ( am thinking of the share issue dilution)??
Would you explain to me please why this has been stated and not used in the debt to Equity comp calculation for the SFP? is this for another calculation ?
I am working through a past paper March/June 16 (question 3 Downing co), and wondering why they have given us this information in the notes.Part d) of the question asks you to identify why the finance director of this entity with revenue of in excess of $267 million is misguided in his interpretation of the figure for diluted earnings per share
The basic and diluted eps figures are given to you and are stated to be correct, so there’s no calculation to be done by you … this time!
The 25 shares per $100 loan on conversion is there merely to give the scenario a bit more realism and to specify that the loan note is a compound instrument asking you to calculate the value of the debt element and therefore, by default, the value of the equity component
It’s worth 5 marks to chit chat about the underlying meaning and importance of the deps figure
OK?
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