CIMAPRO19-CS3-1 Exam Dumps - PDF Questions and Testing Engine
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NEW QUESTION # 12
The following email has just arrived:
From: William Seaton, Director of Finance
To: Finance Manager
Subject: News article
Hi,
My Secretary has drawn my attention to the attached newspaper clipping. I have been reading comments like this since Fouce Oil acquired its interest in 2010. We briefed the press at the time and made it clear that we would not be commenting further on our relationship with it unless it changed materially. Nothing has happened since then to make us change our mind on that.
The Board has asked me to compile a report on the following:
* How might the presence of Fouce Oil, as a 25% shareholder, affect our decision making as a Board of Directors? Perhaps, surprisingly, we have never had a formal discussion of this matter.
* How will Fouce Oil's stake in Slide affect our share price?
I would like you to email me your thoughts on these points so that I can have as long as possible to think about what I will say to the Board.
Thanks
William
The newspaper clipping can be found by clicking on the Reference Materials button.
Answer:
Explanation:
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NEW QUESTION # 13
Wodd's Chairman enters your office:
"I am glad I caught you, I am looking for some advice, but I do not wish to involve your boss at this stage, or any of the other executive directors.
I have been approached by Darrell's Chairman concerning the possibility of a merger between our two companies. I was a little surprised because it has apparently, according to a press article, been in talks with at least one of our competitors and I suspect that it is keen to merge with any large company that can offer some synergy. I understand that Tabel, another major forestry company, has already rejected its proposal.
I happen to know that Darrell has invested a little too heavily in its new MDF factory. It is state of the art, but it has to operate at close to full capacity in order to be economic and Darrell just hasn't got sufficient forestry resources to keep the factory operating at full volume without destroying its own forests.
We are attractive to merge with because we own large forests that can sustain Darrell's needs. We don't manufacture MDF ourselves, but we have lots of experience of supplying this market with raw material. We would divert lots of this output to Darrell's factory. Darrell believes that it would be possible to dominate the MDF industry if it merged with a company such as ourselves. The fact that we were quite liquid at the end of last year also helps, because I understand that Darrell is having a few cash flow problems.
Its Chairman proposes a full merger. This will be achieved by the creation of a new parent company which will acquire existing equity in both companies through an exchange of shares. He and I will head a special nomination committee to select the most suitable Board for the new company and then I will step down from the Board while he continues as Chairman of the new company.
Needless to say, this is all highly confidential.
Do you think that it sounds as if there are potential and achievable synergies between Wodd and Darrell?
Would you regard it as a gross ethical breach to keep this conversation just between the two of us for the time being, without warning your boss, until I have had the chance to negotiate further with my counterpart at Darrell?" Reference Material:
Answer:
Explanation:
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NEW QUESTION # 14
Three weeks have passed since you were informed that the relocation would definitely proceed.
You have received the following email from William Seaton, Director of Finance:
From: William Seaton, Director of Finance
To: Finance Manager
Subject: Detailed issues associated with the relocation
Hi,
Congratulations, you are now officially in charge of the transition team! I am confident that you will do an excellent job and that it will be an opportunity to enhance your career.
I realise that the transition team is expected to reduce the pressure on the Board, but I have been asked to keep an eye on things and to ensure that your team has everything that it needs. I won't interfere, but I will stay in touch.
There are a few matters that I think you should address as a matter of urgency.
* Firstly, we need to have plans in place to ensure that our information systems are ready. What changes will we have to make in order to best align the information system with the company's needs? I am not asking about hardware issues or the physical relocation, but the changes to the information system itself.
* Secondly, how might we make use of the data in our own records and external sources to ensure that the new Head Office is managed as efficiently as possible? Remember that the present Head Office is a large and complex operation in its own right and it costs a significant amount to run.
* Thirdly, our relocation will create a number of challenges for our corporate treasury team. I need you to identify the key challenges and suggest how they might be dealt with.
* Finally, I would like you to identify the criteria against which the success or failure of your team will be judged once the transition is complete. I need your recommendations to be relevant and measurable.
William
Answer:
Explanation:
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NEW QUESTION # 15
Press clipping from today's Financial News:
Yesterday's announcement of yet another major oil find by Slide should keep everybody happy. Nobody will be happier than the directors of Fouce Oil, whose continuing ownership of one quarter of Slide's shares continues to confuse industry insiders. Perhaps there are hidden depths to the relationship between Slide and Fouce Oil.
Answer:
Explanation:
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NEW QUESTION # 16
The formal merger with Darrell has been negotiated and the legal formalities have been completed. The two company management teams are working on the integration of the two businesses.
You receive an email from Peter Sorchi, the Chief Executive of the merged company:
From: Peter Sorchi, Chief Executive Officer
To: Senior Finance Manager
Subject: Integration of IT and treasury
Hi,
I need you to advise me on a couple of matters. The attached press clipping shows how sensitive this is.
We need to integrate the IT and treasury functions of the former Wodd and Darrell. I thought that it would be a simple matter of identifying the common ground and slimming down both companies' departments to cover the new entity, but I have the heads of both IT and treasury from each company arguing that their approaches are better for the merged group and that they should take the lead.
Wodd's Treasurer claims to be an expert in natural hedging of currency risks and Darrell's argues that her department was highly successful because it makes excellent use of derivatives for hedging. Both agree only on the fact that they cannot work together. I am afraid that I have to agree with them on that and the Board will have the difficult decision of choosing between them.
I have the opposite problem with the IT function. The two Heads of IT are excited to be able to combine their databases and to develop their respective interests in Big Dat a. They claim that we should retain all of the professional staff in both departments and possibly even expand the merged IT Department beyond that. Given the rationalisation in all of our other functions, I do not think that we can agree to that, but I would hate to throw away a worthwhile opportunity.
Please give me your thoughts on the following:
* What approach to hedging is more likely to meet our needs: natural hedging or heavy use of derivatives?
* Ignoring hedging, what other factors should we consider in deciding between the two treasurers?
* Are the two heads of IT likely to be correct in arguing that we need to retain all existing IT staff in order to exploit synergies in data, particularly opportunities to leverage Big Data?
* What would the challenges be in motivating them to reduce their joint staffing levels and how might we deal with these?
Peter
Answer:
Explanation:
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NEW QUESTION # 17
You have received the following email from Marcus Svenson, Finance Director:
From: Marcus Svenson, Finance Director
To: Senior Finance Manager
Subject: News reports
Hi,
I have sent you a link to a news site on the internet. Things are getting complicated in Bravador.
Every Board member has been asked to attend a brainstorming session this afternoon, before the CEO flies out to Bravador this evening. We will be considering the following four matters:
* Is it acceptable for us to develop this forest, given the commitment that we have made with respect to indigenous peoples' rights? They have been quoted at the end of the news article.
* Is it fair for the environmental protestors to complain that our operations are unsustainable?
* Would it be unethical to offer to build a village, with a proper school and medical clinic, for the tribe and to offer them work in our forestry operations?
* Is it really a good idea for the CEO to fly to Bravador just to appear on the television news in his boots and overalls?
Please email me your thoughts on each of these matters before I leave for the meeting this afternoon.
Marcus
Answer:
Explanation:
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NEW QUESTION # 18
You have received the following email from Marcus Svenson, Finance Director:
From: Marcus Svenson, Finance Director
To: Senior Finance Manager
Subject: Investment opportunity
Hi,
The Board is considering an investment opportunity to buy a forest in Bravador, a country in South Americ a. This will be a major expansion and will also enable us to diversify into new lines. For example, the forest contains lots of hardwood varieties that we could sell to companies in the double glazing industry or to furniture manufacturers. I downloaded the attached extract from an online encyclopaedia for your information.
The forest that we are planning to buy has not been used for commercial purposes until now. The land belonged to the Government for many years and it has been left to grow naturally. The Government is now keen to sell the land and has agreed that it may be used for commercial forestry purposes.
This investment will enable us to increase our output of softwoods by up to 20% per year, in addition to enabling us to enter the hardwood market.
I need two things from you. I need you to recommend a suitable approach to managing our relationship with the Bravadorian Government. I also need you to identify and explain the political risks that will remain even if we succeed in creating a sound relationship with the Government.
Marcus
Reference Material:
Answer:
Explanation:
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NEW QUESTION # 19
Twelve hours have passed since you received the telephone call concerning the oil spillage.
You receive the following telephone call from William Seaton, Director of Finance:
"The press has got a hold of the story about the oil leak. Our share price has taken a major hit. Indeed, Slide's market capitalisation has fallen by a third since the stock exchange opened for business. There is a lot of loose talk in the press about the knock-on effect of this crisis for Slide. It has not escaped anybody's notice that there are news teams showing injured wildlife. There is also a great deal of footage being broadcast on the other sites around the world where we are revitalising oil wells using the same technology that was in use at AZ40.
Our experts have only just arrived at the spillage site. While they were on the corporate jet they emailed their initial thoughts, based on their understanding of what went wrong. Our engineers anticipate a major operation to block the leak by pumping cement into the bore hole at a low pressure. This will be expensive, but the cost will be less than one tenth of the reduction in our market capitalisation.
I need an email from you:
* Firstly, I need a clear explanation of the key risks that Slide now faces because of this crisis. I am only interested in those with a high risk and high consequence and I need you to justify those classifications because the Board will need to prioritise its responses.
* Secondly, two related issues: I need you to explain why Slide's share price has fallen to such an extent AND to recommend, with reasons, whether we should release our costings of the repair scheme at this time.
It goes without saying that I need this urgently."
Answer:
Explanation:
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NEW QUESTION # 20
SIMULATION
A week later, Romuald Marek stops by your workspace and hands you a document.
The Board minute extract from Romuald can be viewed by clicking the Reference Material button above.
Reference Material
Board minutes extract: proposal to profit from ongoing strength of NS
Anna Obalowu Sole, Chief Operating Officer, reported that the strong NS was helping generate revenues from fuel sales. Discussion followed as to whether the strong N$ was likely to persist and whether a strong N$ benefits Arrfield overall.
Markus Jokel
a. Chief Executive Officer, stated that the Board should develop contingency plans that could be implemented if it seemed likely that the strong N$ would persist. In particular. Arrfield need not renew the contracts that permit aviation fuel suppliers to operate from its airports. Arrfield would then be free to create its own fuel sale business, buying fuel in bulk to replenish the storage tanks at each of its airports in Norland and then selling it directly to airlines He stated that this would almost certainly enhance Arrfield's share price Romuald Marek reminded the Board that four of Arrfield's six airports are located in Norland and that those airports charge for aeronautical and non-aeronautical services in N$.
Answer:
Explanation:
See the answer below in explanation
Explanation:
Requirement : 1
A strong domestic currency in the Aviation business makes the business more profitable. It is evident form interest rate parity that the exchange rate of currency appreciate as the interest rate fall. The interest rate of the Norland is lower than other countries will make the N$ appreciated as compare to the other countries.
A strong domestic currency is not always good for the Aviation business. It intrinsically involves the use of foreign currency on regular basis. A strong NS may decrease the revenues of the Arrfield because it will become costly for the airlines from abroad. The airlines may find airport of other nearby countries with cheaper currency which will allow them cost savings with the use of cheaper currency.
Requirement : 2
By starting aviation fail business by the Arrfield could increase the share price.
Suitability:
The aviation fuel business suits to Arrfield because of three reasons. 1- It will be taken by the market as backward integration. This will reduce the risk of the Arrfield significantly. 2- The companies in Norland with a strong currency are able to import cheaper fuel and offering discount to airlines. This can be profitable business. 3- The criticism by the environmentalists may be managed by taking corrective actions i.e. selling fuel at full price.
The Airfield could club the fuel charges into the landing, take off and terminal usage fee, this could ease the process for the airlines could make the airports more popular. The Arrfield could also manage the fuel inventory as per requirements because they have the schedule of the flights.
Acceptability:
The shareholders of the Arrfield will accept the proposal as it seems profitable and it may increase the shar price of the Arrfield share because of the material information regarding starting a new business line will give positive feed sign. The reputation risk arise from article a week before regarding selling cheaper fuel may also be mitigated by taking over the business and corrective actions may be taken.
The matter will not be appreciated by the companies they would wish to continue with Arrfield. They must also be satisfied on termination of contract.
Feasibility:
Arrfield have 4 major airports (three hub and a spoke) in Norland. The hub airports are big and planes are fueled with the underground pipelines and workforce work in close connection with the fuel companies. The Arrfield have the infrastructure to start its business of aviation fuel.
NEW QUESTION # 21
The Director of Finance, William Seaton, has invited you into his office.
"This will come as a bit of a shock, but the Board has decided that it would be in our best interests to relocate our Head Office from Kayland to the Middle East. We have interests there, including a regional office, already. We know that the oil industry is welcome and there are several governments which are very open to such foreign direct investment from the West.
Nothing has been decided for certain, but there are compelling tax advantages to us relocating. We would also be subject to slightly less restrictive legal requirements. We can retain our listing on the Kayland stock exchange, albeit as a foreign company.
Things are very much under consideration at the moment, so please don't tell anybody about this conversation.
I want to check that I have thought of everything at the strategic level before we make an irreversible decision to move. I need you to write me a report on the following:
* What are the strategic implications of moving our Head Office from Europe to the Middle East?
* What are the strategic risks that might arise and how might we deal with them?
I need to have your thoughts soon because the Board is holding a special meeting this afternoon."
Answer:
Explanation:
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NEW QUESTION # 22
You have just received the following email:
From: William Seaton, Director of Finance
To: Finance Manager
Subject: Oil reserves
Hi,
This email arrived from the Head Geologist earlier today. I am concerned that many of our colleagues understand very little other than rock formations and drilling reports. They certainly misunderstand accounting issues. I have already had some very confused discussions with the other members of the Board.
I need a very clear report from you that I can circulate to the other Board members. I am not particularly interested in the technical accounting rules. I do not think that you necessarily require an accounting standard to tell you that a particular disclosure is misleading.
I need your report to cover the following:
* Should we make a public announcement of this information? I would like a clear indication of the implications for our relationship with our various stakeholders AND the ethical issues that you feel are relevant.
* What are the implications for our share price? I would like your analysis to consider the factors that will indicate how our share price will change upon the announcement.
Thanks
William
The email referred to above can be found by clicking on the Reference Materials button.
Answer:
Explanation:
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NEW QUESTION # 23
Newsweb
Protesters block bulldozers
Attempts by Wodd to harvest some of the hardwood trees from their newly acquired Bravadorian forest suffered a further setback yesterday.
Wodd's bulldozers have been unable to make any headway in clearing the site for the company's first logging base because environmental groups from several countries have descended on the Bravadorian jungle to protest the proposed destruction of the forest and the associated harvesting of many rare hardwood trees. Protestors have chained themselves to trees and to heavy equipment, making it impossible to commence the clearance operations.
Wodd's problems have been compounded by the recent discovery that a tribe of forest dwellers has lived in the forest for many generations, making little or no contact with the outside world in the process. The tribe is effectively nomadic, moving from one part of the forest to another, surviving by hunting game and gathering edible vegetation and relocating when food starts to become scarce. The environmental protestors claim that Wodd's activities will make it impossible for this tribe to continue with its traditional way of life.
Wodd claims to adhere to The Forestry Stewardship Council of Marland's ten principles, which include the assurance that "The legal and customary rights of indigenous peoples to own, use and manage their lands, territories, and resources shall be recognized and respected." Reference Material:
Answer:
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NEW QUESTION # 24
Daily Gazette
Draft story for comment
The singer, the forester and the tax adviser
Popular singer Barry Crauder is regarded as one of our more financially-aware personalities. He works hard, releasing at least one new album every year and serving as a judge on a popular talent show. He has a reputation for investing this income wisely, choosing to save for his future rather than squandering on the trappings of the show business lifestyle.
Crauder's popularity was severely damaged when it emerged that he pays little or no tax on the investment income derived from his portfolio of investments. That is because he has used one of the few remaining tax loopholes, namely investment in forestry. He owns significant areas of forestry in the far North of Marland. We estimate his earnings from those investments to exceed M$800,000 every year and yet he has not paid a single Cent in tax on that income since he first invested in forestry ten years ago. In contrast, a typical fan who earns the national average wage of M$28,000 every year will pay approximately M$7,000 in tax.
So, could we all invest in forestry? Well, not unless we can afford it. I posed as a wealthy business entrepreneur and approached several leading tax advisers. Most were interested in helping me to invest a seven figure sum to avoid tax, but warned that saving tax could be expensive in terms of fees and commissions.
Four firms recommended forestry as the ideal investment. All recommended Wodd, with whom all four claimed to conduct "significant business". They said that a typical client would give Wodd a bank draft and leave the purchase and subsequent management to Wodd in return for a fee. Most clients had never even seen the forests that they own and none ever need to make a management decision concerning the growth or sale of timber.
Sadly, investing in forestry is a rich person's pursuit. I was warned that companies such as Wodd are unlikely to entertain a potential client whose initial investment does not run into the tens of millions of M$.
Please address any response to Sonia Jones, care of the Daily Gazette news desk, as quickly as possible.
Answer:
Explanation:
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NEW QUESTION # 25
A further eight weeks have passed since the discussion concerning Wodd's creation of an accredited Forest Certification Service.
Wodd's Chairman has asked you to a meeting:
"I thought that we had a lucky escape over the Barry Crauder story from a recent news article, but the Government is considering modifying the tax arrangements associated with forestry. Professional forestry companies such as Wodd will continue to pay no tax on forestry profits, but private individuals such as Mr Crauder will be taxed on profits just as they would for any other business. The Government is taking this action because public opinion is against granting generous tax relief to wealthy individuals.
For the moment, this is all highly secret. The minister responsible for forestry has spoken to the chairmen of all of the major forestry companies on the basis that each gives a personal guarantee to respect the Government's confidence. The minister has done so because she is concerned that stock markets will panic when the news of the tax changes are announced next week. If the shareholders incorrectly believe that we will lose the tax shield on our profits then the share price will drop like a stone. We will be able to announce that we are aware of the changes and that we will not be taxed differently because of them.
I have spoken to the Board about this, making them promise not to repeat any of this information. We have called in and briefed the key analysts who advise the main institutional investors in Marland on the forestry industry.
As things stand, we can expect a lot of the wealthy individuals who own forests to divest themselves as soon as they discover that there are no more tax incentives. That will have significant implications for Wodd, both directly and indirectly.
The Board believes that the markets will overreact when the tax changes are first announced and that we will be unable to do much to manage that. One suggestion that has been put forward is that we should increase the dividend slightly as a signal that we are confident in the future strength of the industry. I suspect that the executive directors are just a little too concerned with the fact that they all have stock options that can only be exercised on a date that falls just after the government is due to announce its intentions on tax.
I need your thoughts in order to have an independent viewpoint from that voiced by the Board:
* What effect will the tax changes have on our business?
* Do you agree that briefing the analysts will mitigate the risk of our share price overreacting when the tax changes are announced?
* Will the additional dividend payment help to maintain the share price?
* Is granting executive stock options always a sound basis for aligning the interests of the executive directors and the shareholders?"
Answer:
Explanation:
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NEW QUESTION # 26
Four weeks have passed since your encounter with the Chairman. The directors of both companies were informed of the proposal to merge two weeks ago and the public was informed two days ago.
You have received the following email from Marcus Svenson, Finance Director:
From: Marcus Svenson, Finance Director
To: Senior Finance Manager
Subject: Merger negotiations
Hi,
Please see the attached table and also a comment that I downloaded from a Wodd shareholder's blog, showing the market capitalisations for Wodd and Darrell both before and after the merger announcement.
If I am reading this correctly, it would appear that we are suffering at the hands of Darrell because the market believes that it is getting more of the benefit from the merger. This is before the terms of the merger have even been announced.
I need you to do two things:
Please draft a formal response to Market Blogger's post. We will insert this into his blog as a formal response from Wodd's Board and we will also email it to all shareholders.
Please draft an outline strategy for negotiating with Darrell's Board. Clearly, I want Wodd's shareholders to get the best possible deal out of this merger.
Marcus
Reference Material:
Answer:
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NEW QUESTION # 27
Six months have passed. Wodd has announced its intention to create a biomass power station in its North Forest, to be fuelled by trees from the North Forest itself and also waste biomass products from other timber land owned by Wodd in that area.
The news has received mixed reactions. Younger residents of the small towns close to North Forest were delighted because their local economy will be boosted. Older residents and those living further afield within the region complain that the power station will pollute the environment and the destruction of the North Forest will blight an area of outstanding beauty. A residents' group has been established online, with support from Marland's largest environmental lobbying group, to block the proposal.
You have received the following email from Marcus Svenson, Finance Director:
From: Marcus Svenson, Finance Director
To: Senior Finance Manager
Subject: Stakeholder issues
Hi,
I have sent you a link to the website created by the protestors against the biomass power station. This is causing serious problems because we still need to gain formal Government approval, although the Government supports biomass as an energy source as it is far cleaner and more sustainable than fossil fuel and far less controversial than nuclear. Needless to say, the press has picked up on this and is starting to run the story.
We had reached agreements in principle with Marland Bank for funding for this project and with a civil engineering contractor for the construction work, but both are now nervous about signing contracts because neither wishes to be associated with an environmental scandal.
I need two things from you.
Please draft the body of a press release that we can issue in response to the claims on the protestors' website. Add a few comments to explain what your arguments are trying to achieve (I don't want us simply to state that we disagree with the protestors, I want us to offer meaningful arguments in response). Just write your draft as part of your reply to this email and I will circulate it to the other Board members for approval before we submit it.
Please suggest some safeguards that we can put in place to enable us to retain the support of the bank and the civil engineer throughout this project.
Marcus
Answer:
Explanation:
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NEW QUESTION # 28
Newsweb
Wodd and Darrell announce plans for restructuring
True to form, the ink was barely dry on the last contract before the corporate restructuring experts arrived to "counsel out" the staff who have become "surplus to requirements". Wodd and Darrell have still to agree on a new name for their merged entity, but they have already announced the need for "efficiency savings". The first redundancy notices have already been issued and many more are expected to follow over the next few weeks.
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NEW QUESTION # 29
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