CIMA Exam CIMAPRA19-F03-1 Topic 3 Question 111 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 111
Topic #: 3

[All CIMAPRA19-F03-1 Questions]

A company has in a 5% corporate bond in issue on which there are two loan covenants.

* Interest covermust not fall below 3 times

* Retained earnings for the yearmust not fall below $3.5 million

The Company has 200 million shares in issue.

The most recent dividend per share was $0.04.

The Company intends increasing dividends by 10% next year.

Financial projections for next year are as follows:

Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?

AThe company will be in compliance with both covenants.

BThe company will be in breach of both covenants.

CThe company will breach the covenant in respect of retained earnings only.

DThe company will be in breach of the covenant in respect of interest cover only.

Show Suggested Answer

Suggested Answer: C

by Ngoc at Jun 15, 2025, 01:48 AM

Limited Time Offer

25%

Off

Contribute your Thoughts:

Submit Cancel

4 days ago

I agree with Oliva, the financial projections seem to support that.

upvoted 0 times

...

9 days ago

I think the company will be in compliance with both covenants.

upvoted 0 times

...