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CIMA F3
Version: Demo
Financial Strategy
[ Total Questions: 5]
Question 1
Which of the following will be used in the calculation of
the return on equity (ROE)?
A. Operating profit
B. Net profit
C. Capital employed
D. Long-term liabilities
Answer: B
Explanation:
Return on equity (ROE) = (net profit / equity) x 100
Question 2
Select ONE correct answer. Business sustainability
focuses more on the:
A. Financial impacts of an entity.
B. Non-financial impacts of an entity.
C. Environmental impacts.
D. Both financial and non-financial impacts.
Answers: D
Question 3
Which of the following is NOT a valid objective for a
not-for-profit organization?
A. Increase dividends by 8% per year.
B. Reduce customer complaints by 2%.
C. Achieve a balance between spending and income.
D. Increase the funding of the organization
Answers: A
Explanation:
The primary objective of a not-for-profit entity is to
fulfill the purpose it was set up for, which is usually
non-financial. Its secondary objective is to raise and use
funds efficiently to maximize benefit, so it needs to
ensure sound financial management if it is to conduct
its affairs smoothly. For-profit corporations are
authorized to issue shares of stock to shareholders in
return for capital investments. Shareholders receive a
return on their investments when dividends are paid or
when assets are distributed after dissolution. Nonprofit
corporations neither issue shares nor pay dividends; no
part of the corporation’s income may be distributed to
its members, directors or officers.
Question 4
EFG Co is a company listed on the stock exchange. It has
1 million $0.20 par value ordinary shares in issue and
$500,000 worth of $100 par value bonds. The shares and
bonds are trading at $1.50 and $94 respectively. What is
EFG Co’s gearing ratio, calculated as the [debt/equity]
ratio using market values?
A. 53.3%
B. 31.3%
C. 33.3%
D. 23.8%
Answers: B
Explanation:
Equity = 1000,000 x $1.50 = $1500,000
Bonds = = 5000 bonds
Debt = 5000 x $94 = $470,000
Debt/Equity Ratio = x 100 = 31.3%
Question 5
Almost every entity has a potential for a conflict of
objectives. The greater the number of stakeholders, the
greater will be the probability that their objectives will
come into conflict. Which of the following organizations
is LEAST likely to have conflicting objectives?
A. A public sector entity that has just been privatized
B. A company seeking listing on a stock exchange
C. A charitable organization
D. A small flower shop
E. A multinational company
Answers: D
Explanation:
A small flower shop is likely to have a single owner and
fewer stakeholders than the other organizations
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