CIMA Updated F3 Exam Questions and Answers by noor

A – True: listed companies face more onerous reporting and disclosure.

B – True: flotation planning must allow for issue/underwriting costs when deciding how much capital to raise.

C – True: listing can enhance reputation and credit standing, often improving supplier terms.

D – False: increased scrutiny usually reassures investors.

E – False: a company must become/remain a public company to list, not re-register as private.

Answer (Q118): A, B, C

Current price = $5.00

Rights discount = 20% → Issue price = 5 × 0.8 = $4.00

Funds required = $20m

Number of new shares:

20m4=5m shares\frac{20\text{m}}{4} = 5\text{m shares}420m​=5m shares

Currently 20m shares in issue, so ratio:

5m20m=14\frac{5\text{m}}{20\text{m}} = \frac{1}{4}20m5m​=41​

So terms = 1 new share for every 4 existing → A.

CIMA F3 clearly distinguishes between not-for-profit/public sector organisations and for-profit private sector organisations, particularly in relation to objectives, performance measurement, and stakeholder focus.

Statement A – Correct

Clinic A is funded by central government and provides free healthcare. This fits the CIMA F3 definition of a not-for-profit (public sector) organisation, whose primary purpose is service delivery rather than profit generation.

Clinic B is a listed company owned by shareholders and charges patients directly, making it a for-profit organisation.

✔ Therefore, statement A is correct.

Statement B – Incorrect

Maximising shareholder wealth is the primary financial objective only of for-profit companies, such as Clinic B.

Public sector organisations like Clinic A do not have shareholders and therefore cannot have shareholder wealth maximisation as an objective.

✘ Statement B is incorrect.

Statement C – Correct

CIMA F3 teaches that public sector organisations are primarily assessed on value for money, which incorporates:

Economy

Efficiency

Effectiveness

Since Clinic A is government-funded, its performance would be appraised mainly using value-for-money criteria rather than profitability.

✔ Statement C is correct.

Statement D – Incorrect

While Clinic B may consider some non-financial objectives (such as service quality or reputation), its primary objectives are financial, particularly profit and shareholder wealth maximisation.

The statement implies equal weighting, which is inconsistent with CIMA F3 theory.

✘ Statement D is incorrect.

Statement E – Correct

Despite differing ownership and funding, both organisations share the same primary non-financial objective: the provision of quality healthcare.

CIMA F3 highlights that organisations in the same sector often share common service objectives, regardless of profit motive.

✔ Statement E is correct.

Pre-acquisition standalone values:

ABB = $55m

BBA = $25m

Total pre-deal value = $80m.

After the acquisition, ABB (the combined business) is expected to generate post-tax cash flows of $10m per year in perpetuity. Cost of equity = 10%, and the firm is all-equity financed, so:

Post-acquisition value=100.10=$100m\text{Post-acquisition value} = \frac{10}{0.10} = \$100\text{m}Post-acquisition value=0.1010​=$100m

Synergy value = value of combined firm − sum of standalone values:

Synergy=100−80=$20m\text{Synergy} = 100 - 80 = \$20\text{m}Synergy=100−80=$20m

So the best estimate of the synergy from the acquisition is $20 million.