Expert Answers to CIMA Exam F3 Questions

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CIMA Strategic level Financial Strategy

Financial Strategy

Last Update May 6, 2024
Total Questions : 435

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Questions 4

Which of the following statements about companies seeking a stock market listing is correct?

Options:

A listing may make it harder for a company to raise money from its existing lenders.

The enhanced reputation of the company can improve its credit rating reducing the risk of non-payment to suppliers and lenders.

When a company seeks a listing this may unsettle its staff, potentially resulting in a loss of valued employees.

A listing will require the owners to either sell a majority of their shares, or, if they retain their shares, to step down from the board.

Discussion 0

Questions 5

A listed company plans to raise new capital which will be required for future investment projects. The company has a gearing ratio of 50%, which is just below the company's target ratio.

The directors are comparing the benefits and drawbacks of each of the following two alternative sources of finance;

• Unsecured bank borrowings.

• Convertible bonds.

Which of the following statements is correct?

Options:

If the share price does not increase sufficiently for conversion to take place the company will have more expensive debt with a convertible bond than with unsecured borrowings.

Additional finance will be raised upon conversion of the convertible bond but not with unsecured borrowings.

The coupon rate of a convertible bond is likely to be lower than for unsecured borrowings.

If the convertible bond holders eventually convert to shares the company's gearing ratio will rise whereas it will be unaffected if finance is with unsecured borrowings.

Discussion 0

Questions 6

Company ABD and Company BCD operate in the same industry and each has a significant market share.

The directors of Company ABD have heard rumours in the market that Company BCD is planning to bid to takeover Company ABD. They do not believe the takeover would be in the best interests of the shareholders and are therefore keen to prevent the bid from going ahead.

Which THREE of the following defense strategies could be used by the directors of Company ABD at this point in time?

Options:

Communicate effectively with their shareholders

Revalue the non-current assets

Refer the bid to the competition authorities

Poison Pill

White Knight

Discussion 0

Questions 7

A listed company has suffered a period of falling revenues and profit margins. It has been obliged to issue a profit warning to the market and its share price has fallen sharply. The company relies heavily on debt finance and is discussing with its banks possible refinancing options to assist with a restructuring programme.

Which THREE of the following are likely to be of MOST interest to the company's banks when they review the refinancing requests?

Options:

Cash flow forecasts

Current capital structure

Trends in share price movements

Shareholder profile

Book value of assets

Discussion 0

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