- 1 Marks
BCL – L1 – SA – Q70 – Company Directors
Action outside the board of directors’ powers.
Find Related Questions by Tags, levels, etc.
Report an error
Tag (SQ): Debentures
Search
500
+ past questions and counting.
- 20 Marks
BCL – L1 – Q100 – Legal implications relating to companies in difficulty or in crisis
Discuss issuing certificates to debenture holders, stages of involuntary liquidation, and characteristics of a floating charge.
Question
Kwame Asare believes that debenture holders, though not being shareholders, deserve to be issued certificates. This is because, without their funds, the company cannot survive.
Required:
Explain if you agree or disagree with Kwame Asare on his view on the issue of certificates to debenture holders.
(a) Identify FOUR (4) stages of involuntary liquidation and explain the consequence of each stage identified.
(b) Explain THREE (3) characteristics of a floating charge.
Find Related Questions by Tags, levels, etc.
Report an error
- 15 Marks
FR – L2 – Q57 – Financial Instruments
Calculate face value and proceeds of debentures issued by Unity Cooperative Ltd.
Question
UNION COOPERATIVE LTD
On 1 July 20X4, Union Cooperative Ltd., issued 20,000 8% debentures at GH¢97.50. The security is redeemable in five years’ time. The interest on the debentures is payable bi-annually on 30 June and 31 December.
On 31 December 20X4, the company’s year-end date, the debentures were quoted on the Ghanaian Stock Exchange for GH¢96.00. The company accountant has suggested each of the following as possible valuation basis for reporting the debentures liability on the statement of financial position as at 31 December 20X4: (i) Face value of the debentures. (ii) Face value of the debenture plus interest payment for five years. (iii) Market value on the statement of financial position as at the year end.
Required
(a) Determine the face value of the debentures and the proceeds accruing to the company.
(b) Determine the amount and explain the nature of the differences between the face value and the market value of the debentures on 1 July, 20X4.
(c) Distinguish between nominal and effective rate of interest.
(d) Determine the nominal interest payable on the debentures for the year ended 31 December 20X4.
(e) State arguments for or against each of the suggested alternatives for reporting the debentures liability on the statement of financial position as at 31 December 20X4.
Find Related Questions by Tags, levels, etc.
Report an error
- 8 Marks
FM – L2 – Q1 – Sources of finance: equity
Calculate and comment on ratios relevant to investors for SunnyCorp, including EPS, PE ratio, dividend yield, dividend cover, interest yield, and gearing.
Question
The following figures have been extracted from the annual accounts of SunnyCorp:
| Item | Amount |
|---|---|
| Issued share capital | 1,000,000 ordinary shares of ZAR 1 each, fully paid |
| Issued debt capital | ZAR 250,000 10% debentures |
| Reserves | |
| Capital (share premium reserve) | ZAR 200,000 |
| Accumulated profits | |
| Profit and distributions | |
| Profit for the year | ZAR 600,000 (before interest and tax) |
| Ordinary dividend payments | ZAR 0.20 per share |
The current market price of SunnyCorp’s equity shares is ZAR 3.20 each. Its debentures are priced at ZAR 90 per cent. The company’s rate of corporation tax (income tax) is 30%.
Required:
Calculate the ratios that are likely to be of interest to an investor or potential investor in SunnyCorp.
Comment on each:
(8 marks for calculations, 8 marks for comments)
Find Related Questions by Tags, levels, etc.
- Tags: Debentures, Dividend yield, Earnings per share, Equity ratios, Financial Ratios, Gearing, Investor metrics
- Level: Level 2
- Topic: Dividend policy
Report an error
