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

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

GEARING

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › GEARING

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • September 14, 2020 at 4:08 pm #585580
    rumanailyas
    Member
    • Topics: 9
    • Replies: 12
    • ☆

    ‘Tax exhaustion can increase cost of borrowing at high levels of gearing”

    I dont understand this statement. How does tax exhaustion increase cost of borrowing?

    September 15, 2020 at 9:05 am #585677
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51950
    • ☆☆☆☆☆

    Normally tax makes the cost of debt cheaper because the interest is tax allowable.

    However that assumes that the company is making enough profit to cover the interest.

    High levels of gearing mean more interest is being paid. That might mean that the interest is higher than the profit available and so the company will not get the full benefit of the tax saving on the interest. If they are not getting the full tax saving then the cost of debt will be higher.

  • 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

ACCA News:

Changes to the SBL exam from September 2023

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

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

Subscribe to ACCA’s Student Accountant Direct

 

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

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

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • John Moffat on CAPM and MM Combined – ACCA Financial Management (FM)
  • Rana Nabeel on CAPM and MM Combined – ACCA Financial Management (FM)
  • John Moffat on Investment Appraisal Under Uncertainty: Sensitivity Analysis (example 1) – ACCA Financial Management (FM)
  • DIVIJ on Investment Appraisal Under Uncertainty: Sensitivity Analysis (example 1) – ACCA Financial Management (FM)
  • John Moffat on Interpretation of Financial Statements part a – ACCA Financial Accounting (FA) lectures

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy