Cima freetechexam full Access F3 Tutorials by Haider q78 vce pdf

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Exam Name:	Financial Strategy
Exam Code:	F3 Dumps
Vendor:	CIMA	Certification:	CIMA Strategic level
Questions:	435 Q&A's	Shared By:	haider

Question 120

An entity prepares financial statements to 31 December each year. The following data applies:

1 December 20X0

• The entity purchased some inventory for $400,000.

• In order to protect the inventory against adverse changes in fair value the entity entered into a futures contract to sell the inventory for a fixed price on 31 January 20X1.

• The entity designated this contract as a fair value hedge of the value of the inventory.

31 December 20X0

• The inventory had a fair value of $480,000 and the futures contract had a fair value of $75,000 (a financial liability).

What will be the impact on the statement of profit or loss and other comprehensive income for the year ended 31 December 20X0 in respect of the change in the value of the inventory and the futures contract?

Options:

A loss of $75,000 will be recognised in profit or loss.

A loss of $75,000 will be recognised in other comprehensive income.

A net gain of $5,000 will be recognised in profit or loss.

A net gain of $5,000 will be recognised in other comprehensive income.

Discussion

Question 121

Company RRR is a well-established, unlisted, road freight company.

In recent years RRR has come under pressure to improve its customer service and has had some success in doing this However, the cost of improved service levels has resulted in it making small losses in its latest financial year. This is the first time RRR has not been profitable.

RRR uses a 'residual' dividend policy and has paid dividends twice in the last 10 years.

Which of the following methods would be most appropriate for valuing RRR?

Options:

Valuing the tangible assets and intangible assets of RRR.

The P/E method, adjusting the P/E of a listed company downwards to reflect RRR's unlisted status.

The earnings yield method, adjusting the earnings yield of a listed company downwards to reflect RRR's unlisted status.

The dividend valuation model.

Discussion

Question 122

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?

Options:

Achieving more press coverage for the company.

Creating new opportunities for employees.

Achieving greater cultural diversity.

Acquiring Intellectual Property assets.

Exploiting production synergies.

Elimination of existing competition.

Discussion

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Question 123

A company's gearing (measured as debt/(debt + equity)) is currently 60% and it is investigating whether an optimal gearing structure exists within the industry.

It has analysed the capital structure of similar companies in the industry and it would appear that there is evidence supporting the traditional theory of capital structure.

Companies with the lowest WACC in the industry have gearing of around 45% to 50%.

Which of the following actions would result in the company achieving a more optimal capital structure?

Options:

Undertaking a rights issue of equity to repay some of its debt.

Refinancing to replace some of its short term debt with long term debt.

Increasing the level of dividend to return more cash to shareholders.

Using retained cash to undertake a buyback of some of its equity.

Discussion

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