Free CIMA CIMAPRA19-F03-1 Exam Dumps Questions & Answers

A consultancy company is dependent for profits and growth on the high value individuals it employs.
The company has relatively few tangible assets.
Select the most appropriate reason for the net asset valuation method being considered unsuitable for such a company.

• A.It accounts for the intangible assets at historical value.
• B.It accounts for intangible assets at net realisable value.
• C.It does not account for the intangible assets.
• D.It does not account for tangible assets.

A company's current profit before interest and taxation is $1.1 million and it is expected to remain constant for the foreseeable future.
The company has 4 million shares in issue on which the earnings yield is currently 10%. It also has a $2 million bond in issue with a fixed interest rate of 5%.
The corporate income tax rate is 20% and is expected to remain unchanged.
Which of the following is the best estimate of the current share price?

• A.$2.00
• B.$2.50
• C.$2.75
• D.$1.10

Company AB was established 6 years ago by two individuals who each own 50% of the shares.
Each individual heads a separate division within the company, which now has annual turnover of GBP10 million and employs 40 people.
Some of the employees are very highly paid as they are important contributors to the company's profitability.
The owners of the company wish to realise the full value of their investment within the next 12 months.
Which TWO of the following options are most likely to be acceptable exit strategies to the two owners of the company?

• A.Management Buyout
• B.Spin off (or de-merger)
• C.Sale to a Private Equity Investor on an earn-out basis
• D.Sale to a larger competitor
• E.Initial Public Offering (IPO)

BBA is a wholly owned subsidiary of AAB BBA operates in country B where the currency is the B$.
The following is an extract from BBA's financial statements at 31 December 20X1:

The following Information is relevant:
" The bonds were trading at $110 per $100 on 31 December 20X1. "Operating profit of BBA for the year ended 31 December 20X1 was S15 million
* The P/E ratio is 8
* Corporate income tax rate is 20%.
The tax authorities m country B Implemented thin capitalisation rules based on the level of gearing of the subsidiary, calculated as book value o( debt lo book value of equity The cut-off point for gearing used by the tax authorities for a company to be thinly capitalised is 75%.
Which of the following statements is correct as at 31 December 20X1?

• A.Gearing is 83.33%. thin capitalisation rules are not breached
• B.Gearing is 250%. thin capitalisation rules are breached
• C.Gearing Is 71.43%. thin capitalisation rules are not breached
• D.Gearing is 83.33%. thin capitalisation rules are breached

The directors of the following four entities have been discussing dividend policy:

Which of these four entities is most likely to have a residual dividend policy?

• A.B
• B.C
• C.A
• D.D