Borrowing – Knowsia

ATP – Aug 2015 – L2 – Q3 – Income Tax Computation

Advise on tax implications of loans from Zenith Bank and Bank of America for Zabta Company.

Question

(a). Zabta Company Limited has been in operation in Ghana for less than two years. The Managing Director is not comfortable with the Head of Finance with regard to the manner in which he handles tax issues of the company and has therefore sought your advice on the tax implications of the following intended transactions by the company: i) Borrowing from Zenith Bank (Ghana) Limited of an amount of GHS2.50 million at an interest rate of 28% per annum and a commitment fee of 1% flat. ii) Borrowing from Bank of America (in the USA) of an amount of US$4.00 million at an interest rate of 9% per annum and a commitment fee of 0.3% flat.

As a newly appointed tax consultant of the company, you are required to advise the Managing Director (in a memorandum) of the tax implications of the above transactions.

(b). You have been recently appointed an Advisor responsible for Finance and Tax at the office of the Chief of Staff of Ghana. The Chief of Staff has requested you for a reasoned write-up of the taxability status of the Vice-President of the Republic of Ghana under the Internal Revenue Act, 2000 (Act 592) as amended.

You are required to explain the taxability status of the Vice-President of the Republic of Ghana under the provisions of the Internal Revenue Act, 2000 (Act 592), as amended with respect to income tax, capital gains tax, and gift tax.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing, Ghana tax laws, Interest Deduction, VAT, Withholding Tax
Level: Level 2

Topic: Income Tax Computation
Series: AUG 2015

FM – May 2017 – L3 – Q6 – Financial Risk Management

Analyze the use of an interest rate swap between two companies for mutual benefit.

Question

Large Plc. (LP) wishes to borrow N200 million for five years to finance the purchase of new non-current assets. The preference of the company’s Directors is that these funds are borrowed at a fixed rate of interest. The company’s long-term debt is currently rated BBB, meaning LP would have to pay 6.5% p.a. for fixed rate borrowing. Alternatively, LP could borrow at a floating rate, i.e. the prime lending rate (PLR) + 2.25% at the present time.

The Directors of LP have recently been informed by its bank that TK Plc. is also currently looking to borrow N200 million for five years at a floating rate of interest, and its AA rating gives it access to floating rate borrowing at PLR + 1.50% per annum. TK Plc. would pay 5.50% per annum for fixed rate borrowing at the present time.

Required:

a. State FIVE reasons that a company might have for entering into an interest rate swap. (5 Marks)

b. Show how an interest rate swap could be used to the equal benefit of both companies, assuming that the terms of the swap agreement are such that LP’s swap payment to TK Plc. is to be 5.5% fixed per annum. (7 Marks)

c. Identify, with a supporting brief explanation, which of the two companies would be disadvantaged if the PLR were to fall consistently within the five-year term of the interest rate swap. (1 Mark)

d. Identify TWO risks that both companies will face, should they decide to enter into the interest rate swap agreement. (2 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing, Interest Rate Swap, Risk Management
Level: Level 3

Topic: Financial Risk Management

PSAF – Nov 2016 – L2 – Q5b – Fiscal Policy and Public Finance

This question explains the adverse consequences that public debt can have on a nation's economy.

Question

Explain any THREE ways by which public debt can constitute a burden to the nation.

Answer

Find Related Questions by Tags, levels, etc.

Tags: adverse effects, Borrowing, Economic Challenges, Public Debt
Level: Level 2

Topic: Fiscal Policy and Public Finance
Series: NOV 2016

SCS – Nov 2019 – L3 – Q2b – Capital structure

Discuss the potential benefits and problems of converting short-term borrowing into long-term loans.

Question

i) Discuss the potential benefits and problems with proposals to convert the company’s short-term borrowings into a longer-term loan.

ii) Pay bigger cash salaries, or add a share option element to the remuneration packages.

iii) Maintain the dividend for 2019 at the 2018 level, or even reduce it further.

iv) Convert any surplus dollar cash into cedis.

(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing, Currency Conversion, Financial structure, Foreign Exchange, Long-term loans, Risk Management
Level: Level 3

Topic: Capital structure
Series: NOV 2019

ATP – Aug 2015 – L2 – Q3 – Income Tax Computation

Advise on tax implications of loans from Zenith Bank and Bank of America for Zabta Company.

Question

As a newly appointed tax consultant of the company, you are required to advise the Managing Director (in a memorandum) of the tax implications of the above transactions.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing, Ghana tax laws, Interest Deduction, VAT, Withholding Tax
Level: Level 2

Topic: Income Tax Computation
Series: AUG 2015

FM – May 2017 – L3 – Q6 – Financial Risk Management

Analyze the use of an interest rate swap between two companies for mutual benefit.

Question

Required:

a. State FIVE reasons that a company might have for entering into an interest rate swap. (5 Marks)

c. Identify, with a supporting brief explanation, which of the two companies would be disadvantaged if the PLR were to fall consistently within the five-year term of the interest rate swap. (1 Mark)

d. Identify TWO risks that both companies will face, should they decide to enter into the interest rate swap agreement. (2 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing, Interest Rate Swap, Risk Management
Level: Level 3

Topic: Financial Risk Management

PSAF – Nov 2016 – L2 – Q5b – Fiscal Policy and Public Finance

This question explains the adverse consequences that public debt can have on a nation's economy.

Question

Explain any THREE ways by which public debt can constitute a burden to the nation.

Answer

Find Related Questions by Tags, levels, etc.

Tags: adverse effects, Borrowing, Economic Challenges, Public Debt
Level: Level 2

Topic: Fiscal Policy and Public Finance
Series: NOV 2016

SCS – Nov 2019 – L3 – Q2b – Capital structure

Discuss the potential benefits and problems of converting short-term borrowing into long-term loans.

Question

i) Discuss the potential benefits and problems with proposals to convert the company’s short-term borrowings into a longer-term loan.

ii) Pay bigger cash salaries, or add a share option element to the remuneration packages.

iii) Maintain the dividend for 2019 at the 2018 level, or even reduce it further.

iv) Convert any surplus dollar cash into cedis.

(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing, Currency Conversion, Financial structure, Foreign Exchange, Long-term loans, Risk Management
Level: Level 3

Topic: Capital structure
Series: NOV 2019

Question Tag: Borrowing

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

ATP – Aug 2015 – L2 – Q3 – Income Tax Computation

Advise on tax implications of loans from Zenith Bank and Bank of America for Zabta Company.

FM – May 2017 – L3 – Q6 – Financial Risk Management

Analyze the use of an interest rate swap between two companies for mutual benefit.

PSAF – Nov 2016 – L2 – Q5b – Fiscal Policy and Public Finance

This question explains the adverse consequences that public debt can have on a nation's economy.

SCS – Nov 2019 – L3 – Q2b – Capital structure

Discuss the potential benefits and problems of converting short-term borrowing into long-term loans.

ATP – Aug 2015 – L2 – Q3 – Income Tax Computation

Advise on tax implications of loans from Zenith Bank and Bank of America for Zabta Company.

FM – May 2017 – L3 – Q6 – Financial Risk Management

Analyze the use of an interest rate swap between two companies for mutual benefit.

PSAF – Nov 2016 – L2 – Q5b – Fiscal Policy and Public Finance

This question explains the adverse consequences that public debt can have on a nation's economy.

SCS – Nov 2019 – L3 – Q2b – Capital structure

Discuss the potential benefits and problems of converting short-term borrowing into long-term loans.

Our offerings

Contact Info

Customer

Get In Touch

Question Tag: Borrowing

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

ATP – Aug 2015 – L2 – Q3 – Income Tax Computation

Advise on tax implications of loans from Zenith Bank and Bank of America for Zabta Company.

You're reporting an error for "ATP – Aug 2015 – L2 – Q3 – Income Tax Computation"

FM – May 2017 – L3 – Q6 – Financial Risk Management

Analyze the use of an interest rate swap between two companies for mutual benefit.

You're reporting an error for "FM – May 2017 – L3 – Q6 – Financial Risk Management"

PSAF – Nov 2016 – L2 – Q5b – Fiscal Policy and Public Finance

This question explains the adverse consequences that public debt can have on a nation's economy.

You're reporting an error for "PSAF – Nov 2016 – L2 – Q5b – Fiscal Policy and Public Finance"

SCS – Nov 2019 – L3 – Q2b – Capital structure

Discuss the potential benefits and problems of converting short-term borrowing into long-term loans.

You're reporting an error for "SCS – Nov 2019 – L3 – Q2b – Capital structure"

ATP – Aug 2015 – L2 – Q3 – Income Tax Computation

Advise on tax implications of loans from Zenith Bank and Bank of America for Zabta Company.

You're reporting an error for "ATP – Aug 2015 – L2 – Q3 – Income Tax Computation"

FM – May 2017 – L3 – Q6 – Financial Risk Management

Analyze the use of an interest rate swap between two companies for mutual benefit.

You're reporting an error for "FM – May 2017 – L3 – Q6 – Financial Risk Management"

PSAF – Nov 2016 – L2 – Q5b – Fiscal Policy and Public Finance

This question explains the adverse consequences that public debt can have on a nation's economy.

You're reporting an error for "PSAF – Nov 2016 – L2 – Q5b – Fiscal Policy and Public Finance"

SCS – Nov 2019 – L3 – Q2b – Capital structure

Discuss the potential benefits and problems of converting short-term borrowing into long-term loans.

You're reporting an error for "SCS – Nov 2019 – L3 – Q2b – Capital structure"

Our offerings

Contact Info

Customer

Get In Touch

admin

Pick a Form