• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

June 2025 ACCA Exam Results

Comments & Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for June 2025 exams.
Get your discount code >>

Financing Policy

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Financing Policy

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 3, 2021 at 5:14 pm #622979
    AshleyMarc1997
    Member
    • Topics: 48
    • Replies: 24
    • ☆☆

    Pop Co is switching from using mainly long-term fixed rate finance to fund its working capital to using mainly short-term variable rate finance.

    Which of the following statements about the change in Pop Co’s working capital financing policy is true?

    A Finance costs will increase
    B Re-financing risk will increase
    C Interest rate risk will decrease
    D Overcapitalisation risk will decrease

    The correct answer is B

    Can you please explain that why re-financing risk will increase because the company has adopted aggressive financing policy. But why it results in increase in finance cost?

    June 4, 2021 at 7:01 am #623040
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54705
    • ☆☆☆☆☆

    The answer is not saying that the finance cost will increase (although it might) it is saying that the risk of re-financing will increase.

    The reason is that the lender of short-term finance (such as an overdraft) can demand repayment at any time which means there is risk about replacing the finance. With long-term finance there will be a fixed long-term agreement for the borrowing and so there is less risk in the short-term of having to replace it with more borrowing.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • kmottea on IASB Conceptual Framework – Introduction – ACCA Financial Reporting (FR)
  • Hamza101 on Sub-leases – ACCA (SBR) lectures
  • AdityaSairam on Overcapitalisation and Overtrading – ACCA Financial Management (FM)
  • verweijlisa on Financial performance – Example 2 – ACCA Financial Reporting (FR)
  • John Moffat on Linear Programming – Spare capacity and Shadow prices – ACCA Performance Management (PM)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in