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CIMA CIMAPRA19-F03-1 (F3 Financial Strategy) Certification Exam is a comprehensive examination that assesses a candidate's knowledge and understanding of financial strategy. F3 exam is designed to test the candidate's ability to apply financial concepts and principles to real-world situations in order to make informed decisions that drive business success. F3 Exam covers a wide range of topics, including financial analysis, risk management, investment strategies, and financing options.
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CIMAPRA19-F03-1 exam is a part of the Chartered Institute of Management Accountants (CIMA) professional certification program, which is recognized globally as a mark of excellence in the field of management accounting. Candidates who pass the CIMAPRA19-F03-1 exam demonstrate their proficiency in financial strategy and are equipped with the skills and knowledge necessary to advance their careers in finance and accounting. F3 Exam is challenging and requires significant preparation, but the benefits of achieving the certification are substantial and can help candidates stand out in a competitive job market. CIMA F3 Financial Strategy Sample Questions (Q44-Q49):NEW QUESTION # 44
Company YZZ has made a bid for the entire share capital of Company ZYY
Company YZZ is offering the shareholders in Company ZYY the option of either a share exchange or a cash alternative
Which THREE of the following would be considered disadvantages of accepting the cash consideration for the shareholders of Company ZYY?
A. Taxation is payable on realised capital gains.
B. Cash consideration is certain whereas Company YZZ's future share price performance is uncertain
C. Company YZZ Is not expected to change *s dividend policy post-acquisition
D. There will be no opportunity to participate in the future economic success of Company YZZ
E. Interest rates on deposit accounts are currently at an historic low and are expected to remain low
Answer: A,D,E
NEW QUESTION # 45
Three companies are quoted on the New York Stock Exchange. The following data applies:
Which of the following statements is TRUE?
A. Companies A and B have the same capital structure
B. Company A has the greatest business risk
C. Companies A and B have the same business risk
D. Companies A and C have the same business risk
Answer: C
Explanation:
Correct answer: D. Companies A and B have the same business risk
Business risk is measured by asset beta.
A and B both have asset beta = 1.16, so same business risk.
C has higher asset beta (1.20), so highest business risk.
NEW QUESTION # 46
A company has a 4% corporate bond in issue on which there are two loan covenants.
* Interest cover must not fall below 4 times
* Retained earnings for the year must not fall below S5 00 million
The Company has 100 million shares in issue. The most recent dividend per share was $0 10 The Company intends increasing dividends by 8% next year.
Financial projections tor next year are as follows:
Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?
A. The company will be in breach of the covenant in respect of interest cover only.
B. The company will be in compliance with both covenants.
C. The company will breach the covenant in respect of retained earnings only.
D. The company will be in breach of both covenants
Answer: C
Explanation:
This question examines loan covenant compliance, a topic covered in CIMA F3 under Debt Finance, Financial Risk, and Dividend Policy. Loan covenants are contractual restrictions imposed by lenders to protect their interests. Breaching a covenant can trigger penalties or loan repayment demands, so directors must assess compliance carefully using projected financial information.
The company has two covenants:
* Interest cover must not fall below 4 times
* Retained earnings for the year must not fall below $5.00 million
Step 1: Interest Cover Covenant
CIMA F3 defines interest cover as:
From the projections:
* EBIT = $25.00 million
* Interest = $3.20 million
Since 7.8 > 4, the company meets the interest cover covenant.
Step 2: Retained Earnings Covenant
Earnings after tax are projected at $15.26 million.
The most recent dividend per share is $0.10, and dividends are planned to increase by 8%:
With 100 million shares in issue:
Retained earnings for the year:
Since $4.46 million < $5.00 million, the company breaches the retained earnings covenant.
Conclusion (CIMA F3 Interpretation)
* Interest cover covenant: Complied with
* Retained earnings covenant: Breached
Under CIMA F3 guidance, directors must recognise that even when profitability appears strong, dividend policy can cause covenant breaches if distributions are excessive.
NEW QUESTION # 47
A venture capitalist invests in a company by means of buying
* 6 million shares for $3 a share and
* 7% bonds with a nominal value of $2 million, repayable at par in 3 years' time The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment The company has 8 million shares in issue What is the minimum total equity value for the company in 3 years' time required to satisfy the venture capitalist's expected return? Answer:
Explanation:
Give your answer to the nearest $ million
31
NEW QUESTION # 48
The value of a call option will increase because of:
