Q: 6
BBA is a wholly owned subsidiary of AAB BBA operates in country B where the currency is the B$.
The following is an extract from BBA's financial statements at 31 December 20X1:
The following Information is relevant:
" The bonds were trading at $110 per $100 on 31 December 20X1. "Operating profit of BBA for the
year ended 31 December 20X1 was S15 million
• The P/E ratio is 8
* Corporate income tax rate is 20%.
The tax authorities m country B Implemented thin capitalisation rules based on the level of gearing
of the subsidiary, calculated as book value o( debt lo book value of equity The cut-off point for
gearing used by the tax authorities for a company to be thinly capitalised is 75%.
Which of the following statements is correct as at 31 December 20X1?
The following Information is relevant:
" The bonds were trading at $110 per $100 on 31 December 20X1. "Operating profit of BBA for the
year ended 31 December 20X1 was S15 million
• The P/E ratio is 8
* Corporate income tax rate is 20%.
The tax authorities m country B Implemented thin capitalisation rules based on the level of gearing
of the subsidiary, calculated as book value o( debt lo book value of equity The cut-off point for
gearing used by the tax authorities for a company to be thinly capitalised is 75%.
Which of the following statements is correct as at 31 December 20X1?Options
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