PracticeVCE CIMAPRA19-F03-1 Real Exam Question Answers Updated [Apr 10, 2023]
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The CIMA CIMAPRA19-F03-1 (F3 Financial Strategy) Certification Exam is a professional certification exam designed for individuals who want to demonstrate their advanced knowledge and skills in financial strategy. The exam is offered by the Chartered Institute of Management Accountants (CIMA), a leading global professional body that offers training and certification in management accounting and related fields.
The CIMAPRA19-F03-1 exam consists of objective test questions and is administered using computer-based testing (CBT) technology. The exam is divided into two sections, each lasting 90 minutes, and consists of 60 multiple-choice questions. The first section covers financial strategy formulation, while the second section covers financial strategy implementation and evaluation. Candidates must pass both sections to earn the certification.
NEW QUESTION # 97
M is an accountant who wishes to take out a forward rate agreement as a hedging instrument but the company treasurer has advised that a short-term interest rate future would be a better option.
Which of the following is true of a short-term interest rate
- A. It must be kept for ne whole duration of the contract
- B. It can be tailored to the exact reeds of the company.
- C. The date is flexible and the position can be closed quickly and easily.
- D. It interest rates have gone down the price of the future will have fallen.
Answer: A
NEW QUESTION # 98
At the last financial year end, 31 December 20X1, a company reported:
The corporate income tax rate is 30% and the bank borrowings are subject to an interest cover covenant of 4 times.
The results are presently comfortably within the interest cover covenant as they show interest cover of 8.3 times. The company plans to invest in a new product line which is not expected to affect profit in the first year but will require additional borrowings of $20 million at an annual interest rate of 10%.
What is the likely impact on the existing interest cover covenant?
- A. Interest cover would reduce to 5 times and the covenant would NOT be breached.
- B. Interest cover would reduce to 5 times and the covenant would be breached.
- C. Interest cover would reduce to 3 times and the covenant would be breached.
- D. Interest cover would reduce to 3 times and the covenant would NOT be breached.
Answer: A
NEW QUESTION # 99
Company A has a cash surplus.
The discount rate used for a typical project is the company's weighted average cost of capital of 10%.
No investment projects will be available for at least 2 years.
Which of the following is currently most likely to increase shareholder wealth in respect of the surplus cash?
- A. Investing in the local money market at 4% each year.
- B. Maintaining the cash in a current account.
- C. Investing in a 2 year bond returning 5% each year.
- D. Paying the surplus cash as a dividend at the earliest opportunity.
Answer: D
Explanation:
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NEW QUESTION # 100
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 management team agrees to buy back the Venture Capital Funds shareholding in 5 years time at its original cost.
- B. The private company obtains a stock market listing on a recognised exchange within the next 5 years.
- C. 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.
- D. 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.
- E. 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.
Answer: B,C,E
NEW QUESTION # 101
A is a listed company. Its shares trade on a stock market exhibiting semi-strong form efficiency.
Which of the following is most likely to increase the wealth of A's shareholders?
- A. Announcing that inventory will be impaired.
- B. Announcing that a project will be undertaken generating a positive net present value.
- C. Announcing that a non-current asset will be revalued in the statement of financial position.
- D. Announcing that the final dividend will remain unchanged from the previous 3 years.
Answer: B
NEW QUESTION # 102
An all equity financed company plans an issue of new ordinary shares to the general public to raise finance for a new project The following data applies:
* 10 million ordinary shares are currently in issue with a market value of S3 each share
* The new project will cost S2.88 million and is expected to give a positive NPV of S1 million
* The issue will be priced at a AaA discount to the current share price.
What gam or loss per share will accrue to the existing shareholders?
- A. Loss of $0.08
- B. Loss of $0.18
- C. Gain of $0.08
- D. Gain of 0.18
Answer: C
NEW QUESTION # 103
A company aims to increase profit before interest and tax (PBIT) each year.
The company reports in A$ but has significant export sales priced in B$.
All other transactions are priced in A$.
In 20X1, the company reported:
In 20X2, the only changes expected are:
* An increase in export prices of 10%, but no change to units sold.
* A rise in the value of the B$ to A$/B$ 2.500 (that is, A$ 1 = B$ 2.5)
Is it likely that the company would still meet its objective to grow PBIT between 20X1 and 20X2?
- A. No, PBIT would fall by A$ 48 million.
- B. Yes, PBIT would increase by A$ 48 million.
- C. No, PBIT would fall by A$ 150 million.
- D. Yes, PBIT would increase by A$ 150 million.
Answer: A
NEW QUESTION # 104
WW is a quoted manufacturing company. The Finance Director has addressed the shareholders during WW's annual general meeting-She has told the shareholders that WW raised equity during the year and used the funds to repay a large loan that was maturing, thereby reducing WW's gearing ratio At the conclusion of the Finance Director's speech one of the shareholders complained that it had been foolish for WW to have used equity to repay debt The shareholder argued that the Modigliani and Miller model (with tax) offers proof that debt is cheaper than equity when companies pay tax on their profits.
Which THREE arguments could the Finance Director have used in response to the shareholder?
- A. The shareholder was confusing the cost of capital with shareholder wealth
- B. The Modigliani and Miller model would only be valid in practice if WW's shareholders were aware of the model and believed in its validity
- C. A lower gearing ratio will result in an increase in the value of the company
- D. WW was approaching a debt covenant limit and it was therefore important to reduce gearing.
- E. Reducing the gearing ratio has reduced the financial risk of WW which will benefit shareholders
- F. A lower gearing ratio creates greater flexibility for WW in the future
Answer: C,D,E
NEW QUESTION # 105
Select the most appropriate divided for each of the following statements:
Answer:
Explanation:
NEW QUESTION # 106
Which THREE of the following are likely to be strategic reasons for a horizontal acquisition?
- A. To secure key parts of the value chain
- B. Acquisition of an undervalued company
- C. Reduction of competition
- D. To achieve economies of scale
- E. Reduction of risk by building a larger portfolio
Answer: B,C,D
NEW QUESTION # 107
Which of the following would be a reason for a company to adopt a low dividend pay-out policy?
- A. High profitability
- B. Using dividends to give a signal to the stock market
- C. A lack of investment opportunities
- D. A lack of alternative sources of finance
Answer: B
NEW QUESTION # 108
A company's statement of financial position includes non-current assets which are leased, the tax regime follows the accounting treatment.
Which cash flows should be discounted when evaluating the cost of lease finance?
- A. Lease payments, implied interested and straight-line accounting deprediation.
- B. Lease payments and straight-line accounting depreciation.
- C. Lease payments, tax relief on implied interest and tax relief on straight-line account depreciation.
- D. Lease payments and implied interest.
Answer: B
NEW QUESTION # 109
A venture capitalist invests in a company by means of buying:
* 9 million shares for $2 a share and
* 8% 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 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
Give your answer to the nearest $ million.
$ million.
- A. 34, 36, 34000000, 35000000
- B. 34, 35, 34000000, 35000000
Answer: B
NEW QUESTION # 110
A company is funded by:
* $40 million of debt (market value)
* $60 million of equity (market value)
The company plans to:
* Issue a bond and use the funds raised to buy back shares at their current market value.
* Structure the deal so that the market value of debt becomes equal to the market value of equity.
According to Modigliani and Miller's theory with tax and assuming a corporate income tax rate of 20%, this plan would:
- A. increase the market value of the company's equity.
- B. decrease the company's equity beta.
- C. increase shareholder wealth.
- D. increase the company's asset beta.
Answer: C
NEW QUESTION # 111
RR has agreed to sell goods to XX for S20.000 XX will pay when the goods are delivered in 6 months time. RR's home currency is the £- The current exchange rate is 4.3 £/S. The projected inflation rate for the S is 2.8%, and for the E 4 6%.
When RR receives payment for its goods, what will the value be to the nearest pound?
- A. £85,243
- B. £84.520
- C. £86 760
- D. £87.506
Answer: D
NEW QUESTION # 112
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The CIMA F3 (Financial Strategy) Exam is a professional certification exam offered by the Chartered Institute of Management Accountants (CIMA). This exam is designed to test the candidates' knowledge and skills in developing and implementing financial strategies for businesses. The F3 exam is the third level of the CIMA Professional Qualification, and it forms a part of the Strategic Level exams.
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