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CIMA F3 Exam Syllabus Topics:

Section	Weight	Objectives
Financial Policy Decisions	15%	- Dividend and distribution policy 1. Theories of dividend relevance 2. Practical considerations and constraints - Strategic financial objectives and governance 1. Role of financial strategy in overall corporate strategy 2. Agency theory and stakeholder interests
Business Valuation	20%	- Pricing and negotiation 1. Post-transaction value creation 2. Determining offer price and terms - Valuation methods 1. Asset-based, earnings-based, cash flow-based 2. Relative valuation and market multiples - Valuation concepts and purposes 1. Valuation for listing or equity issuance 2. Valuation for mergers, acquisitions, and disposals
Sources of Long-Term Finance	25%	- Equity finance 1. Types of equity and issue methods 2. Cost of equity and capital structure theories - Optimal capital structure 1. Impact of gearing on risk and return 2. Practical determinants of capital structure - Debt and hybrid finance 1. Types of debt, terms, and covenants 2. Leasing, convertibles, and warrants
Financial Risk Management	15%	- Types and sources of financial risk 1. Interest rate, foreign exchange, commodity risk 2. Credit and liquidity risk - Risk mitigation and hedging strategies 1. Use of derivatives: forwards, futures, swaps, options 2. Internal controls and risk policy frameworks - Risk measurement and assessment 1. Value-at-Risk, duration, gap analysis
Investment Appraisal and Decisions	25%	- Risk analysis in investment decisions 1. Sensitivity, scenario, and simulation analysis 2. Cost of capital estimation and adjustment - Advanced investment appraisal techniques 1. Adjusted present value and real options 2. Discounted cash flow, NPV, IRR, MIRR

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CIMA F3 Financial Strategy Sample Questions (Q201-Q206):

NEW QUESTION # 201
The ex div share price of Company A's shares is $.3.50
An investor in Company A currently holds 2,000 shares.
Company A plans to issue a script divided of 1 new shares for every 10 shares currently held.
After the scrip divided, what will be the total wealth of the shareholder?
Give your answer to the nearest whole $.

A. 7000Scrip issue 1-for-10:Current holding = 2,000 shares at $3.50 # wealth = 2,000 × 3.50 = $7,000.A scrip dividend just increases number of shares and reduces price proportionally, so total wealth stays the same.
B. $7,000-Exhibit (4d5f8789-9564-4746-a118-289adb7184f9)-

Answer: A,B

NEW QUESTION # 202
A company wishes to raise additional debt finance and is assessing the impact this will have on key ratios.
The following data currently applies:
* Profit before interest and tax for the current year is $500,000
* Long term debt of $300,000 at a fixed interest rate of 5%
* 250,000 shares in issue with a share price of $8
The company plans to borrow an additional $200,000 on the first day of the year to invest in new project which will improve annual profit before interest and tax by $24,000.
The additional debt would carry an interest rate of 3%.
Assume the number of shares in issue remain constant but the share price will increase to $8.50 after the investment.
The rate of corporate income tax is 30%.
After the investment, which of the following statements is correct?

A. Interest cover will fall; P/E ratio will rise.
B. Interest cover will rise; P/E ratio will fall.
C. Interest cover will fall; P/E ratio will fall.
D. Interest cover will rise; P/E ratio will rise.

Answer: A

NEW QUESTION # 203
Company A is based in Country A where the functional currency is the A$. Currently all sales are to domestic customers in Country A. However, the company is planning to expand internationally by acquiring Company B, a distribution company in Country B, to enable it to sell goods worldwide The functional currency of Country B is the BS Company A will invoice its international customers in their local currency.
Wage increases in Country B are forecast to be modest, due to high unemployment levels, but overall inflation in Country B is forecast to be significantly higher than in Country A Which TWO of the following statements about the economic risk of the acquisition of Company B are true?

A. Higher inflation will increase the project's BS returns, so the economic risk can be ignored
B. Financing this acquisition with block denominated in B$ will reduce economic risk.
C. Using purchasing power parity, AS is forecast to strengthen against B$, so the economic risk can be ignored
D. Economic risk can be eliminated by using forward contracts to convert future cash flows into A$
E. Exporting into a variety of international markets will reduce economic risk.

Answer: B,E

Explanation:
A - B$ debt as a natural hedge: Borrowing in B$ to finance the B$ investment creates a natural hedge: B$ operating cash inflows help service B$ interest and principal. This reduces the net exposure of A$ shareholders to movements in the B$/A$ rate and so lowers economic risk.
D - Diversifying export markets: Selling into a variety of international markets spreads exposure across multiple economies and currencies, reducing dependence on any single one. This diversification reduces economic risk.
The other options are not true:
B: Forwards hedge specific transactions, not long-term economic risk.
C: Higher local inflation usually comes with currency depreciation and cost increases; economic risk cannot be ignored.
E: If A$ is expected to strengthen, that actually increases economic exposure to B$ earnings, it doesn't remove it.

NEW QUESTION # 204
Company BBB has prepared a valuation of a competitor company, Company BBD. Company BBB is intending to acquire a controlling interest in the equity of Company BBD and therefore wants to value only the equity of Company BBD.

The directors of Company BBB have prepared the following valuation of Company BBD:
Value of Equity = 4.63 + 5.14 + 5.56 = S15.33 million
Additional information on Company BBD:

Which THREE of the following are weaknesses of the above valuation?

A. The valuation is understated as forecast future growth has been ignored beyond year 3.
B. Free cash flows to all investors should be discounted at the cost of equity of 10% rather than WACC of 8%.
C. The approach used calculates the value of the total entity not the value of equity.
D. The valuation is understated as the directors have failed to include a perpetuity factor in the calculations.
E. The valuation is overstated as the directors have failed to deduct tax from the free cash flows.

Answer: C,D,E

NEW QUESTION # 205
CI IJ has decided to move its production plant to overseas country X.
This would make the product cheaper to produce. The technology used to make the product is very advanced and some of the skilled staff would have to move to country X.
The Production Director has identified that there are some political risks in moving to county X.
For each of the political risks of moving to country X shown below, select the correct method for reducing the risk.

Answer:

Explanation:

NEW QUESTION # 206
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