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Get a glimpse of the real CIMAPRA19-F03-1 certification exam challenges with our free CIMAPRA19-F03-1 practice test questions.

A financial services company reported the following results in its most recent accounting period:

q1_CIMAPRA19-F03-1

The company has an objective to achieve 5% earnings growth each year. The directors are discussing how this objective might be achieved next year.

Revenues have been flat over the last couple of years as the company has faced difficult trading conditions. Revenue is expected to stay constant in the coming year and so the directors are focussing efforts on reducing costs in an attempt to achieve earnings growth next year.

Interest costs will not change because the company's borrowings are subject to a fixed rate of interest.

What operating profit margin will the company have to achieve next year in order to just achieve its 5% earnings growth objective'?

Which TWO of the following statements about debt instruments are correct?

AA zero coupon will eliminate the tax shield effect on debt payments.

BChanges in corporation tax rates will have no effect on the tax shield of fixed rate debentures.

CThe true cost of servicing debt instruments to the company is the post-tax cost of debt.

DIf corporation tax rates rise, the tax shield effect on debenture interest will be reduced.

An unlisted software development business is to be sold by its founders to a private equity house following the initial development of the software. The business has not yet made a profit but significant profits are expected for the next three years with only negligible profits thereafter. The business owns the freehold of the property from which it operates. However, it is the industry norm to lease property.

Which THREE of the following are limitations to the validity of using the Calculated Intangible Value (CIV) method for this business?

AThe business owns the freehold property from which it operates.

BSignificant profits are forecast for the next three years with only negligible profits thereafter.

CThe business has not yet made a profit.

DThe CIV method cannot be applied to an unlisted company.

EThe intellectual property representing the software development has not been included in the accounts.

WX, an advertising agency, has just completed the all-cash acquisition of a competitor, YZ. This was seen by the market as a positive strategic move byWX.

Which THREE of the following will WX's shareholders expect the company's directors to prioritise following the acquisition?

AThe integration and retention of key employees of YZ.

BThe development of a dividend policy to meet the expectations of the YZ's shareholders.

CThe regulatory approval required to complete the acquisition.

DThe retention of YZ's key customers.

EThe realisation of anticipated post-acquisition synergies.

ZZZ wishes to borrow at a floating rate and has been told that it can use swaps to reduce the effective interest rate it pays. ZZZ can borrow floating at the risk-free rate + 1, and fixed at 10%.

Which of the following companies would be the most appropriate for ZZZ to enter into a swap with?

ACompany DDA - it can borrow at risk-free rate + 1 Vz and fixed at 10.5%

BCompany CCA - it can borrow at risk-free rate + Y% and fixed at 9%

CCompany BBA - it can borrow floating at risk-free rate +VA and fixed at 12%

DCompany AAB - it can borrow floating at risk-free rate + % and fixed at 9.5%

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