Question Tag: Equity

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FM – Nov 2022 – L3 – Q5 – Business Valuation Techniques

Calculate the equity value of APL using SVA and outline three methods for funding the MBO.

Question

Aderupoko Plc (ADP), a large listed media group, has been the holding company of Adamu Publishers Limited (APL) since 2015. The publishing company (APL) is 100% owned by ADP since inception.

Recently, the directors of APL informed ADP’s board of their readiness to make a management buy-out (MBO) of APL. Accordingly, ADP’s board decided to value APL using the shareholder value analysis method (SVA). ADP’s board estimates that APL has a four-year competitive advantage over its competitors (to 30 September 2024) and the following data regarding APL’s value drivers and additional financial information has been collected:

Year to 30 September	2021	2022	2023	2024	2025+
Sales growth (%)	5%	4%	3%	2%	0%
Operating profit margin	8%	9%	10%	10%	10%
Incremental non-current asset investment (% of sales increase)	5%	6%	3%	2%	0%
Incremental working capital investment (% of sales increase)	6%	5%	4%	4%	0%

Financial Information:

Sales for the current year to 30 September 2020: ₦80 million
Annual depreciation (equal to annual replacement of non-current asset expenditure): ₦2.0 million
Par value of 6% debentures in issue (current market value ₦95.00, nominal value ₦100): ₦10.0 million
Short-term investments held: ₦0.8 million
Company tax rate: 20%
Current WACC: 10%

Required:

a. Calculate the value of APL’s equity using SVA.

(12 Marks)

b. Outline three methods by which APL’s directors might raise the funds necessary for the proposed MBO of the company. (3 Marks)

(Total 15 Marks)

Answer

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Tags: Competitive Advantage, Equity, Funding Methods, MBO, SVA, Valuation
Level: Level 3

Topic: Business Valuation Techniques
Series: NOV 2022

BL – Nov 2020 – L1 – SA – Q3 – Partnership Law

Objective questions testing knowledge on Nigerian government functions, customary law, and partnership structures.

Question

A partnership in which all members are involved in the management of the firm’s business is
A. General partnership
B. Government partnership
C. Limited partnership
D. Active partnership
E. Supreme partnership

Answer

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Tags: Equity, Natural Justice, Partnership Types
Level: Level 1

Topic: Partnership Law
Series: NOV 2020

FR – May 2017 – L2 – SB – Q5 – Preparation of Financial Statements

Discuss distinguishing features of debt and equity presentation under IFRS and explain the impact of classification on financial statements.

Question

The difference between debt and equity in an entity’s statement of financial position is not easily distinguishable for preparers of financial statements. Debts and equity financial instruments may have similar characteristics, which may lead to inconsistency of reporting.

Required:

Discuss the main distinguishing features in the presentation of debt and equity under International Financial Reporting Standards (IFRS) with clear examples.
(10 Marks)
Explain why it is important for entities to understand the impact of the classification of a financial instrument as debt or equity in the financial statement.
(5 Marks)

Answer

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Tags: Classification, Consistency, Debt, Equity, Financial instruments, IFRS, Presentation
Level: Level 2

Topic: Preparation of Financial Statements
Series: MAY 2017

FR – May 2024 – L2 – SB – Q6 – Financial Instruments (IAS 32)

Discuss how to treat transactions of debt and equity instruments in Akwa Nig. Limited under IAS 32.

Question

Akwa Nig. Limited is a private limited company planning to be registered with the Nigeria Exchange Limited (NGX). The company is engaged in the conversion of petrol engines into compressed gas engines.

The following are the transactions of the company in respect of its debts and equity instruments.

Transaction 1:
Akwa Nig. Limited issued 40 million non-redeemable N1 preference shares at par value. Under the terms relating to the preference shares, a dividend is payable on the preference shares only if Akwa Nig. Limited also pays a dividend on its ordinary shares for the same period. (5 Marks)

Transaction 2:
Akwa Nig. Limited entered into a contract with a supplier to buy a significant item of equipment. Under the terms of the agreement, the supplier will receive ordinary shares with an equivalent value of N5 million one year after the equipment is delivered. (5 Marks)

Transaction 3:
The directors of Akwa Nig. Limited, on becoming directors, are required to invest a fixed agreed sum of money in a special class of N1 ordinary shares that only directors hold. Dividend payments on the shares are discretionary and are ratified at the Annual General Meeting (AGM) of the company. When a director’s service contract expires, Akwa Nig. Limited is required to repurchase the shares at their nominal value. (5 Marks)

A senior accountant in your company (Akwa Nig. Limited) has asked for your advice on how the above transactions should be treated in the financial statements of your company in accordance with IAS 32 – Financial Instruments: Presentation.

Required:
Write a memo on the above request, discussing and justifying how each of the transactions should be treated in the financial statements, in accordance with IAS 32 – Financial Instruments: Presentation.

Answer

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Tags: Debt, Equity, Financial instruments, Financial Statements, IAS 32, Preference shares
Level: Level 2

Topic: Financial Instruments (IAS 32, IFRS 9)
Series: MAY 2024

FR – Nov 2015 – L2 – Q5 – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated statement of financial position and calculate goodwill and non-controlling interest for UDO Group Plc.

Question

The trial balance of UDO Plc and its subsidiary, ALOMA Plc, as at December 31, 2014, is given below:

UDO Plc acquired 75% of ALOMA Plc on January 1, 2014, for N1,300,000,000, when the retained earnings of ALOMA Plc were N600 million and the share premium was N170 million. Neither the acquisition nor the loan notes obtained to finance the purchase were recorded in the trial balance. There has been no impairment of goodwill, and no change in share capital since acquisition. It is the group policy to value the non-controlling interest at fair value, which was estimated to be N160 million.

Required:
Prepare the consolidated statement of financial position of UDO Group Plc as at December 31, 2014.

Answer

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Tags: consolidated financial statements, Equity, Goodwill, Group Accounts, IFRS 10, Non-Controlling Interest
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)
Series: NOV 2015

BL – May 2012 – L1 – SA – Q1 – Sources of Nigerian Law

Identifying the problem equity sought to address in common law.

Question

Which problem of common law was equity developed to solve?

A. Age
B. Weight
C. Power
D. Harshness
E. Hegemony

Answer

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Tags: Business Law, Common Law, Equity, Nigerian Legal System
Level: Level 1

Topic: Sources of Nigerian Law
Series: MAY 2012

BL – Nov 2012 – L1 – SB – Q1A – Introduction to Law

List the seven key maxims of equity.

Question

State SEVEN maxims of equity.

Answer

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Tags: Equity, Legal Concepts, Maxims
Level: Level 1

Topic: Introduction to Law
Series: NOV 2012

TAX – May 2021 – L1 – SA – Q1 – Introduction to Taxation

Multiple-choice question assessing knowledge of the principles of taxation.

Question

Which of the following is NOT a principle of taxation?
A. Equity
B. Certainty
C. Convenience
D. Simplicity
E. Residency

Answer

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Tags: Certainty, Convenience, Equity, Residency, Simplicity, Tax Principles
Level: Level 1

Topic: Introduction to Taxation
Series: MAY 2021

BL – Nov 2012 – L1 – SA – Q1 – Sources of Nigerian Law

Identify which of the options is not a Nigerian statute.

Question

Which of the following is NOT a Nigerian statute?

A. Equity
B. Decree
C. Act of Parliament
D. Edict
E. Bye-law

Answer

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Tags: Acts of Parliament, Equity, Legal Systems, Nigerian Statutes
Level: Level 1

Topic: Sources of Nigerian Law
Series: NOV 2012

FA – Nov 2012 – L1 – SB – Q40 – Elements of Financial Statements

Calculate the dividend payable to ordinary shareholders.

Question

If a 10% dividend is approved, what is the dividend payable to ordinary shareholders?

Answer

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Tags: Dividends, Equity, Shareholders
Level: Level 1

Topic: Elements of Financial Statements
Series: NOV 2012

FA – May 2018 – L1 – SA – Q5 – Elements of Financial Statements

Identifies elements related to the measurement of an entity's financial position.

Question

Which of the following elements is directly related to the measurement of an entity’s financial position?
A. Performance, income, and expenses
B. Income, expenses, and equity
C. Performance, income, and equity
D. Assets, liabilities, and equity
E. Assets, liabilities, and performance

Answer

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Tags: Assets, Equity, Financial Position, Liabilities
Level: Level 1

Topic: Elements of Financial Statements
Series: MAY 2018

BL – Nov 2021 – L1 – SB – Q1 – Nigerian Legal System

Defining Nigerian legal terms and advising on audit obligations for a limited liability partnership under CAMA 2020.

Question

a. Nigerian courts are enjoined to apply the common law of England, doctrines of equity, and statutes of general application that were in force on the 1st of January 1900.

Required:

Define:
i. Common law (1 Mark)
ii. Equity (1 Mark)
iii. Statutes of general application (1 Mark)

b. Mercy and Samuel, who are the only partners of a limited liability partnership, are protesting a demand letter served on them for the payment of the sum of N500,000 each by the Corporate Affairs Commission for failure to audit the partnership’s account for the immediate past year and failure to file annual returns for the same period. They are protesting on the grounds that they are not a company and, therefore, not liable to file annual returns, and that the Corporate Affairs Commission has no right to demand the audit. They have approached you as a professional to advise them.

Required:
Advise the partners in line with the provisions of the Companies and Allied Matters Act 2020 on:

i. The Corporate Affairs Commission’s demand for the partnership’s audit (4 Marks)
ii. Whether or not the partnership was under a legal duty to file annual returns with the Corporate Affairs Commission (4 Marks)

c. A limited liability partnership must have a designated partner.

Required:
What shall a designated partner be responsible for? (4 Marks)

d. ADR is the abbreviation for Alternative Dispute Resolution.

Required:

i. Explain briefly Alternative Dispute Resolution (2 Marks)
ii. State THREE mechanisms of Alternative Dispute Resolution (3 Marks)

Answer

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Tags: CAMA, Common Law, Corporate Governance, Equity, Nigerian Courts
Level: Level 1

Topic: Nigerian Legal System
Series: NOV 2021

BL – May 2022 – L1 – SA – Q1 – Sources of Nigerian Law

Identify which item is not a source of Nigerian law.

Question

Which of the following is NOT a source of Nigerian Law?
A. Common Law
B. Allocutus
C. Equity
D. Statutes of General Application
E. Judicial Precedence

Answer

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Tags: Common Law, Equity, Judicial Precedence, Nigerian Law, Sources of Law
Level: Level 1

Topic: Sources of Nigerian Law
Series: MAY 2022

FA – May 2022 – L1 – SA – Q8 – Elements of Financial Statements

Calculate the balance in the share premium account after issuing shares at a premium.

Question

Owen PLC issued 140,000 shares of ₦20 each at a price of ₦120 per share, and the issue cost was ₦2,000,000. What is the balance in the share premium account at the end of this transaction?

A. ₦12,000,000
B. ₦12,800,000
C. ₦14,000,000
D. ₦16,000,000
E. ₦16,800,000

Answer

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Tags: Equity, Share Premium, Shares
Level: Level 1

Topic: Elements of Financial Statements
Series: MAY 2022

FA – May 2021 – L1 – SB – Q6a – Elements of Financial Statements

Explain five elements of financial statements and state four models of measurement of elements of financial statements.

Question

The International Accounting Standards Board (IASB) Conceptual Framework describes the elements of financial statements as broad classes of financial effects of transactions and other events.

i. Explain five elements of financial statements.
ii. State four models of measurement of the elements of financial statements.

Answer

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Tags: Assets, Equity, Expenses, Financial Statements, Income, Liabilities
Level: Level 1

Topic: Elements of Financial Statements
Series: MAY 2021

FA – May 2017 – L1 – SA – Q13 – Elements of Financial Statements

Identifies components of equity in financial statements.

Question

The following are components of equity EXCEPT:
A. Ordinary share capital
B. Share premium
C. Revaluation reserves
D. Retained earnings
E. Loan notes

Answer

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Tags: Equity, Financial Statements, Loan Notes, Share Capital
Level: Level 1

Topic: Elements of Financial Statements
Series: MAY 2017

FA – Nov 2019 – L1 – SA – Q11- Elements of Financial Statements-

Identify which of the following is not an element of financial statements.

Question

Which of the following is not an element of financial statements?

A. Asset
B. Liability
C. Equity interest
D. Income
E. Profit

Answer

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Tags: Asset, Elements of Financial Statements, Equity, Liability
Level: Level 1

Topic: Elements of Financial Statements
Series: NOV 2019

FA – May 2016 – L1 – SA – Q3 – Elements of Financial Statements

A question about the best description of equity in the statement of financial position.

Question

In the statement of financial position, equity is best described as:
A. Market value of the shares of the owners
B. Issued capital and reserves
C. Issued capital and loan notes
D. Revenue and gains
E. Expenses and losses

Answer

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Tags: Capital, Equity, Financial Position, Reserves
Level: Level 1

Topic: Elements of Financial Statements
Series: MAY 2016

BMF – May 2024 – L1 – SB – Q3c – Basics of Business Finance and Financial Markets

Benefits and limitations of retaining profits in a business and reasons for limiting earnings retention.

Question

c. When companies retain profits in the business, the increase in retained profits adds to equity reserves.
i. Explain TWO benefits of retaining profits in the business. (4 Marks)
ii. Explain THREE reasons why there could be a limit to the amount of earnings available for retention. (6 Marks)

Answer

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Tags: Earnings, Equity, Financial management, Retained Profits
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2024

BMF – May 2024 – L1 – SA – Q19 – Basics of Business Finance and Financial Markets

Understanding the role of the statement of changes in equity in financial reporting.

Question

What role does the statement of changes in equity play in a company’s financial reporting and decision-making?
A. It helps in assessing a company’s non-current assets and depreciation methods
B. It provides a detailed breakdown of a company’s cash flows from operating, investing, and financing activities
C. It presents a summary of a company’s equity transactions, aiding stakeholders in understanding financial performance and ownership changes over time
D. It shows the company’s income and expenses, enabling stakeholders to evaluate profitability and cash generation
E. It outlines a company’s long-term debt obligations and interest expense, assisting stakeholders in assessing capital structure and financial stability

Answer

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Tags: Business Decisions, Equity, Financial Reporting
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2024

Question Tag: Equity

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FM – Nov 2022 – L3 – Q5 – Business Valuation Techniques

Calculate the equity value of APL using SVA and outline three methods for funding the MBO.

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BL – Nov 2020 – L1 – SA – Q3 – Partnership Law

Objective questions testing knowledge on Nigerian government functions, customary law, and partnership structures.

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FR – May 2017 – L2 – SB – Q5 – Preparation of Financial Statements

Discuss distinguishing features of debt and equity presentation under IFRS and explain the impact of classification on financial statements.

You're reporting an error for "FR – May 2017 – L2 – SB – Q5 – Preparation of Financial Statements"

FR – May 2024 – L2 – SB – Q6 – Financial Instruments (IAS 32)

Discuss how to treat transactions of debt and equity instruments in Akwa Nig. Limited under IAS 32.

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FR – Nov 2015 – L2 – Q5 – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated statement of financial position and calculate goodwill and non-controlling interest for UDO Group Plc.

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BL – May 2012 – L1 – SA – Q1 – Sources of Nigerian Law

Identifying the problem equity sought to address in common law.

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BL – Nov 2012 – L1 – SB – Q1A – Introduction to Law

List the seven key maxims of equity.

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TAX – May 2021 – L1 – SA – Q1 – Introduction to Taxation

Multiple-choice question assessing knowledge of the principles of taxation.

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BL – Nov 2012 – L1 – SA – Q1 – Sources of Nigerian Law

Identify which of the options is not a Nigerian statute.

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FA – Nov 2012 – L1 – SB – Q40 – Elements of Financial Statements

Calculate the dividend payable to ordinary shareholders.

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FA – May 2018 – L1 – SA – Q5 – Elements of Financial Statements

Identifies elements related to the measurement of an entity's financial position.

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BL – Nov 2021 – L1 – SB – Q1 – Nigerian Legal System

Defining Nigerian legal terms and advising on audit obligations for a limited liability partnership under CAMA 2020.

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BL – May 2022 – L1 – SA – Q1 – Sources of Nigerian Law

Identify which item is not a source of Nigerian law.

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FA – May 2022 – L1 – SA – Q8 – Elements of Financial Statements

Calculate the balance in the share premium account after issuing shares at a premium.

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FA – May 2021 – L1 – SB – Q6a – Elements of Financial Statements

Explain five elements of financial statements and state four models of measurement of elements of financial statements.

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FA – May 2017 – L1 – SA – Q13 – Elements of Financial Statements

Identifies components of equity in financial statements.

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FA – Nov 2019 – L1 – SA – Q11- Elements of Financial Statements-

Identify which of the following is not an element of financial statements.

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FA – May 2016 – L1 – SA – Q3 – Elements of Financial Statements

A question about the best description of equity in the statement of financial position.

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BMF – May 2024 – L1 – SB – Q3c – Basics of Business Finance and Financial Markets

Benefits and limitations of retaining profits in a business and reasons for limiting earnings retention.

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BMF – May 2024 – L1 – SA – Q19 – Basics of Business Finance and Financial Markets

Understanding the role of the statement of changes in equity in financial reporting.

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