Online Access Free CIMAPRA19-F03-1 Exam Questions

A company based in Country D, whose currency is the D$, has an objective of maintaining an operating profit margin of at least 10% each year.
Relevant data:
* The company makes sales to Country E whose currency is the E$. It also makes sales to Country F whose currency is the F$.
* All purchases are from Country G whose currency is the G$.
* The settlement of all transactions is in the currency of the customer or supplier.
Which of the following changes would be most likely to help the company achieve its objective?

• A.The D$ strengthens against the E$ over time.
• B.The D$ weakens against the G$ over time.
• C.The F$ weakens against the D$ over time.
• D.The D$ strengthens against the G$ over time.

A listed company in a high growth industry, where innovation is a key driver of success has always operated a residual dividend policy, resulting in volatility in dividends due to periodic significant investments in research and development.
The company has recently come under pressure from some investors to change its dividend policy so that shareholders receive a consistent growing dividend. In addition, they suggested that the company should use more debt finance.
If the suggested change is made to the financial policies, which THREE of the following statements are true?

• A.It may give a signal to the market that the company is entering a period of stable growth.
• B.There may be a change to the shareholder profile due to 'the clientele effect'.
• C.The company's financial risk will increase due to its increased use of debt finance.
• D.The directors will not have to take shareholder dividend preferences into consideration in future.
• E.Retained earnings have a lower cost than debt finance.

A company's Board of Directors is assessing the likely impact of financing new projects by using either debt or equity finance.
The impact of using debt or equity finance on some key variables is uncertain.
Which THREE of the following statements are true?

• A.The use of equity finance reduces the company's overall financial risk.
• B.Retained earnings is the cheapest form of equity finance.
• C.The use of equity finance will create pressure for increases in dividend per share in the future.
• D.The use of debt finance increases the cost of equity.
• E.The use of debt finance is always preferable to equity finance.
• F.The use of debt finance will always result in an increase in earnings per share.

Company A needs to raise AS500 mi lion to invest in a new project and is considering using a pub ic issue of bonds to finance the investment.
Which THREE of the following statements-relating to this bond issue are true?

• A.The largest issuer of bond i3 the government.
• B.The bond market is unregulated making it easier to raise finance
• C.A company must be listed before it can issue bones.
• D.Bonds issues in the corporate debt market are underwritten.
• E.Purchasing bonds in the capital markets enables entities to borrow large amounts of finance.

Which THREE of the following methods of business valuation would give a valuation of the equity of an entity, rather than the value of the whole entity?

• A.Non-current assets, plus current assets, minus current liabilities
• B.Forecast future cash flows to equity, discounted at the cost of equity.
• C.Forecast future cash flows to all Investors, discounted at the weighted average cost of capital.
• D.Expected dividend in one year's time / (cost of equity - growth rate).
• E.Total earnings x appropriate price-earnings ratio.