1. Which of the following statements is FALSE in regards to gearing?

a. Interest costs on borrowed funds are generally allowable tax deductions.

b. Income received from a large investment portfolio can be reinvested back into the portfolio to compound its growth.

c. Interest costs on borrowed funds are reduced by the amount of franking credits.

d. Income received from a large investment portfolio can be used to assist in payment of interest on borrowings.

2. The adviser should be careful when evaluating a ratio analysis to ensure:

a. the same accounting procedures were used.

b. the dates of the financial statements being compared are the same.

c. all financial statements are used.

d. all of the above.