CIMA Exam CIMAPRA19-F02-1 Topic 1 Question 45 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 45
Topic #: 1

MNO is listed on its local stock exchange. It has a high level of gearing compared to the industry average as a result of rapid expansion funded by debt. The directors of MNO would like to reduce the level of gearing by raising equity to fund the next expansion project. The directors are considering whether to use a placing of new shares or a rights issue.

Which of the following statementsis true?

AA rights issue would not need to be underwritten because the risk of the shares not being taken up is small compared to a placing.

BThe administration costs associated with a placing are usually more expensive than a rights issue because less investors are involved.

CA placing will increase the proportion of the total number of MNO's shares held by large investors.

DThe directors must use a placing before offering the rights issue to existing shareholders.

Show Suggested Answer

Suggested Answer: C

by Kristel at May 09, 2022, 08:05 AM

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