Day: October 19, 2022

A company acquires the net assets of a business for which it issues £400,000 of ordinary shares.

The business acquired has an overdraft of £100,000 but no long term debt.

What is the impact on the gearing and the net cash position of the company?

Select ONE answer:

1. Gearing – Decreases / Net Cash – Increases
2. Gearing – Decreases / Net Cash – Decreases
3. Gearing – Increases / Net Cash – Increases
4. Gearing – Increases / Net Cash – Decreases

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

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