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| Section | Weight | Objectives |
|---|
| Topic 1: Financial Policy Decisions | 15% | - Strategic financial objectives and stakeholder impact
- 1. Financial objective setting
- 2. Taxation and regulatory framework
- 3. ESG and ethical influences
- Interaction between investment, financing and dividend decisions
|
| Topic 2: Sources of Long-term Funds | 25% | - Equity finance
- 1. Ordinary shares, preference shares, rights issues
- 2. Flotation and listing methods
- Debt finance
- 1. Leasing and sale-and-leaseback
- 2. Bonds, loans, convertible instruments
- Capital structure theories and WACC
- 1. Cost of capital calculation
- 2. Modigliani-Miller propositions
- Dividend policy and distribution strategies
|
| Topic 3: Financial Risks | 20% | - Risk reporting and governance - Risk management techniques
- 1. Hedging strategies
- 2. Derivatives: futures, forwards, swaps, options
- Risk measurement and assessment
- 1. Value-at-Risk, sensitivity analysis
- Types of financial risk
- 1. Foreign exchange risk
- 2. Credit and liquidity risk
- 3. Interest rate risk
|
| Topic 4: Business Valuation | 40% | - Mergers, acquisitions and divestments
- 1. Valuation of target companies
- 2. Financing and post-deal integration
- Investment appraisal
- 1. NPV, IRR, payback, discounted payback
- 2. Adjusted present value (APV)
- Valuation methods
- 1. Relative valuation: P/E, EV/EBITDA
- 2. Discounted cash flow (DCF)
- 3. Asset-based valuation
- Impairment testing and value management
|
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CIMA F3 Financial Strategy Sample Questions (Q314-Q319):
NEW QUESTION # 314
Company AAB is located in Country A with the A$ as its functional currency It plans to grow by acquisition and has identified Company BBA as a potential takeover candidate Company BBA is located in Country B with the BS as its functional currency.
The directors of Company AAB are concerned about foreign currency risk if the acquisition goes ahead Which of the following will be most effective in reducing Company AAB's exposure to translation risk if the acquisition is successful1?
- A. Setting up a mufti-currency bank account to net-off receipts and payments
- B. Financing the acquisition with borrowings in BS's
- C. Financing the acquisition with equity in A$'s.
- D. Using forward contracts to fix the exchange rate between the AS and the B$
Answer: B
Explanation:
Translation risk arises when the foreign subsidiary's net assets (in BS) are translated into the parent's currency (A$). The most effective hedge is to match those net assets with liabilities in the same foreign currency. By financing the acquisition with BS borrowings, AAB creates a BS liability that offsets BBA's BS net assets, reducing the net exposure to translation movements.
A$: equity in A$ doesn't hedge BS assets.
Multi-currency bank accounts and forward contracts mainly address transaction risk, not long-term translation of balance sheet net assets.
NEW QUESTION # 315
A venture capitalist has made an equity investment in a private company and is evaluating possible methods by which it can exit the investment over the next 3 years. The private company shareholders comprise the four original founders and the venture capitalist.
Advise the venture capitalist which THREE of the following methods will enable it to exit its equity investment?
- A. The private company undertakes a 1 for 4 rights issue.
- B. The private company conducts a stock split of its share capital.
- C. Trade sale of shares to an external 3rd party.
- D. The private company obtains a stock market listing.
- E. The private company buys back the equity shares.
Answer: C,D,E
NEW QUESTION # 316
Holding cash in excess of business requirements rather than returning the cash to shareholders is most likely to result in lower:
- A. net profit.
- B. liquidity.
- C. return on equity.
- D. vulnerability to a takeover bid.
Answer: C
NEW QUESTION # 317
A company is considering taking out $10.000,000 of floating rate bank borrowings to finance a new project. The current rate available to the company on floating rate barrowings is 8%. The borrowings contain a covenant based on an interested cover of 5 times.
The project is expected to generate the following results:

At what interest rate on the floating rate borrowings is the bank covenant first breached?
- A. 11.0%
- B. 10.0%
- C. 8.0%
- D. 9.4%
Answer: A
NEW QUESTION # 318
It is now 1 January 20X0.
Company V, a private equity company, is considering the acquisition of 40% of the equity of Company A for a total amount of $15 million.
Company A has been established to develop a new type of engine which will be launched at the end of 20X1.
Company A is forecasting that the new engine will result in free cash flows to equity of $2m in its first year of operation and that this will rise by 8% per year for the foreseeable future.
The new engine is the only commercial activity that Company A is involved in.
Company V intends to sell its stake in Company A when the new engine is launched.
Company A has a cost of equity of 12%.
Assuming that Company V receives an amount that reflects the present value of their shares in company A.
what is the estimated annual rate of return to Company V from this investment? (To the nearest %)
Answer: A
NEW QUESTION # 319
......
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