Question 11 2014 April Whats the meaning when the answer states that The shareholders are entitled to all residual profits and so any setback will affect their future cash flows. ? Question 12 2014 April Whats the meaning when the answer states that “Ron may not have a properly diversified portfolio. The markets will not reward him for retaining the diversifiable unsystematic risks. ” and also " The observations of individual employees are unlikely to comprise insider trading. " Question 13 2014 April It would be impractical to permit depreciation as a taxable expense because of the discretion that is available in estimating the charge. what is the term discretion means here ? Question15 2014 April May I know what exactly is scrip issue and scrip dividend ? Under what circumstances the company will issue scrip dividend ?And why would they do so ? Question 192014 April May I know why the answer states that "The figure for EBITDA excludes two of the biggest sources of subjectivity in the financial statements: depreciation and amortisation. " what does it mean by excludes two of the biggest sources of subjectivity? Book value of rights 360000000 Amortisation based on 15 years 24000000 Increase in earnings 16000000 Revised earnings attributable to the shareholders 49500000 Revised EPS 0.99 Can I know how these figures calculated ? Expected share price based on present Expected share price based on revised
Q11 : This is explained in Chapter 4, Section 2.1. Q12 : The point about unsystematic risks is in Ch19, Section 2.2 Q13 : Discretion here means the company has some choice in how it calculates the depreciation. Q15 : All of this is covered in the scrip issue section of Chapter 5 and the scrip dividend section of Chapter 20. Q19 : Subjectivity here is much like the discretion idea in Q13 above - 2 main areas where the company can influence figures in its accounts. BV of rights = cost - depreciation : 400m - 40m Amortising this over 15 years = 360m/15 Increase in earnings = 40m - 24m So revised earnings to shareholders = 58.2 (operating profit) + 24 (increase in profits) - 18.0 (interest) - 6.7 (tax) EPS = revised earnings / 50m shares
