CIMA F3 Financial Strategy CIMAPRA19-F03-1 Dumps in PDF

Free CIMA CIMAPRA19-F03-1 Real Questions (page: 3)

Company C has received an unwelcome takeover bid from Company P.

Company P is approximately twice the size of Company C based on market capitalisation.

Although the two companies have some common business interests, the main aim of the bid is diversification for Company P.

The offer from Company P is a share exchange of 2 shares in Company P for 3 shares in Company C.

There is a cash alternative of $5.50 for each Company C share.

Company C has substantial cash balances which the directors were planning to use to fund an acquisition.

These plans have not been announced to the market.

The following share price information is relevant. All prices are in $.

Which of the following would be the most appropriate action by Company C's directors following receipt of this hostile bid?

  1. Write to shareholders explaining fully why the company's share price is under valued.
  2. Change the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.
  3. Pay a one-off special dividend.
  4. Refer the bid to the country's competition authorities.

Answer(s): A



Which of the following statements about IFRS 7 Financial Instruments: Disclosures is true?

  1. IFRS 7
    only applies to entities that are designated as financial institutions by a regulatory authority.
  2. IFRS 7 requires disclosures to be given for each separate class of financial instruments.
  3. The main requirement of IFRS 7 is for qualitative disclosures relating to financial instruments and market risks.
  4. IFRS 7 requires sensitivity analysis in relation to credit risk.

Answer(s): B



A profit-seeking company intends to acquire another company for a variety of reasons, primarily to enhance shareholder wealth.

Which THREE of the following offer the greatest potential for enhancing shareholder wealth?

  1. Achieving more press coverage for the company.
  2. Creating new opportunities for employees.
  3. Achieving greater cultural diversity.
  4. Acquiring Intellectual Property assets.
  5. Exploiting production synergies.
  6. Elimination of existing competition.

Answer(s): D,E,F



A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bank borrowing as the discount rate.

Details of the two alternatives are as follows:

Buy option:

· To be financed by a bank loan

· Tax depreciation allowances are available on a reducing-balance basis

· Assets depreciated on a straight-line basis

Lease option:

· Finance lease

· Maintenance to be paid by the lessee

· Tax relief available on interest payments and book depreciation

Which THREE of the following are relevant cashflows in the lease-or-buy appraisal?

  1. Tax relief on tax depreciation allowances
  2. Bank loan payments
  3. Maintenance payments
  4. Lease payments
  5. Tax relief on the book depreciation

Answer(s): A,D,E



A company currently has a 6.25% fixed rate loan but it wishes to change the interest style of the loan to variable by using an interest rate swap directly with the bank.

The bank has quoted the following swap rate:

· 5.50% - 5.55% in exchange for LIBOR

LIBOR is currently 5%.


If the company enters into the swap and LIBOR remains at 5%, what will the company's interest cost be?

  1. 5.00%
  2. 5.75%
  3. 5.70%
  4. 6.25%

Answer(s): B



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