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CIMA F3 Certification Exam, also known as the F3 Financial Strategy exam, is an assessment of an individual's understanding of financial management and strategy. CIMAPRA19-F03-1 exam is designed to test a candidate's knowledge of the principles of financial management and the application of these principles in a strategic context. CIMAPRA19-F03-1 Exam is part of the CIMA Professional Qualification, which is recognized globally as a leading qualification in the field of management accounting.
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To be eligible to take the F3 Financial Strategy exam, candidates must have completed the CIMA Certificate in Business Accounting or an equivalent qualification. They must also have completed the CIMA Professional Qualification Operational Level and Management Level exams. CIMAPRA19-F03-1 Exam itself is a computer-based test that consists of 90 multiple-choice questions and lasts for three hours. CIMA F3 Financial Strategy Sample Questions (Q308-Q313):NEW QUESTION # 308
A listed company with a growing share price plans to finance a four-year research project with debt.
The main criterion for the finance is to minimise the annual cashflow payments on the debt.
The research will be sold at the end of the project.
Which of the following would be the most suitable financing method for the company?
A. Standard bonds
B. Bank loan
C. Bonds with warrants
D. Finance lease
Answer: C
NEW QUESTION # 309
Company A is planning to acquire Company B.
Company A's managers think they can improve the performance of Company B to the extent that its own P/E ratio should be applied to Company B's earnings.
Relevant Data:
What is the expected synergy if the acquisition goes ahead?
Give your answer to the nearest $ million. Answer:
Explanation:
$ ? million
8, 8000000
Comprehensive and Detailed Step-by-Step
Explanation:
(Based on CIMA F3: Financial Strategy Principles):In CIMA F3, the valuation of acquisition synergies is based on the principle that synergy equals the increase in combined firm value that arises because the acquiring company can improve the target firm's performance or efficiency. One of the core valuation tools taught in the syllabus is the Price/Earnings (P/E) multiple method, where the value of a company is determined by multiplying its earnings by the appropriate industry or company-specific P/E ratio.The scenario states that Company A believes it can improve Company B's performance sufficiently so that B's earnings should attract Company A's higher P/E ratio rather than its own lower ratio. This is a classic example of an "earnings uplift synergy," discussed frequently in F3 under the section covering mergers, acquisitions, and revaluation synergies.Step 1 - Revalue Company B using Company A's P/E ratioCompany B's current earnings:-Exhibit (a073f387-824e-4a5b-a1c6-4d72404346a7)- Company A's P/E ratio (to be applied):Expected post-acquisition value of Company B:Step 2 - Compare with current market value of Company BCurrent market capitalisation of Company B:-Exhibit (bee41617-
72c3-4f61-b9c2-dc66ad2e046d)-Step 3 - Calculate synergySynergy represents the additional value created above B's current standalone value:-Exhibit (ddc25633-cc16-4412-9577-0f5b4421b393)-This aligns with CIMA F3's framework: synergy is calculated as the difference between the post-acquisition value (based on improved performance and higher multiples) and the pre-acquisition market value.
NEW QUESTION # 310
A Venture Capital Fund currently holds a significant shareholding in a large private company as a result of funding a recent management buyout. It plans to exit this investment in 5 years time at a significant profit.
Which THREE of the following exit mechanisms are most likely to be preferred by the Venture Capital Fund?
A. The Venture Capital Fund has a legal entitlement to sell its shareholding to any third party investor if the company has not obtained a stock market listing within 5 years.
B. The management team has an option to buy the Venture Capital Fund's shares for their nominal value which can be exercised in 5 years time.
C. The management team agrees to buy back the Venture Capital Funds shareholding in 5 years time at its original cost.
D. The Venture Capital Fund has an option to sell its shareholding to the company at twice its original cost which can be exercised in 5 years time.
E. The private company obtains a stock market listing on a recognised exchange within the next 5 years.
Answer: A,D,E
NEW QUESTION # 311
Company A is located in Country A, where the currency is the A$.
It is listed on the local stock market which was set up 10 years ago.
It plans a takeover of Company B, which is located in Country B where the currency is the B$, and where the stock market has been operating for over 100 years.
Company A is considering how to finance the acquisition, and how the shareholders of Company B might respond to a share exchange or cash (paid in B$).
Which of the following is likely to explain why the shareholders of Company B would prefer a share exchange as opposed to a cash offer?
A. It would allow them to realise their investment and make a capital gain.
B. They would receive shares in a market that is likely to be more efficient.
C. It would avoid them being exposed to foreign currency risk.
D. It would enable them to benefit from the future performance of the combined entity.
Answer: D
Explanation:
Reasoning:
A share exchange allows Company B's shareholders to stay invested and participate in the future gains (synergies, growth) of the combined business.
A is wrong: cash offers are what "realise" an investment and crystallise a capital gain.
B is wrong: a share exchange introduces foreign currency exposure (to A$), whereas a cash offer in B$ does not.
C is wrong: Company B is in the older, more established market, so it is more likely that market is efficient, not Company A's.
So D is the correct explanation.
NEW QUESTION # 312
The directors of a unlisted manufacturing company have prepared a valuation of their company using the price-earning method.
Their calculation is:
Value if the company's equity = $6 million x 10 =$60 million where.
* $6 million is the company's reported profit before interested and tax in the most recent accounting period and
* 10 is the average price-earnings ratio for all listed companies
Which THREE of the following are weakness of this valuation?
A. The price-earnings ratio should have been an average for companies in the same industry sector rather than alI listed companies
B. The equity result needs to be uplifted in recognition that this is an unlisted company.
C. A forecast of sustainable profit should have been used instead of a historical figure
D. Profit after tax should have been used in the calculation instead of profit before interest and tax.
E. The price-earnings valuation method gives a value for the entire entity not Just a value of the equity.
