Prepare P3 Question Answers Free Update With 100% Exam Passing Guarantee [2022]
Dumps Real CIMA P3 Exam Questions [Updated 2022]
NEW QUESTION 160
G plc has decided to move its production plant to overseas Country A.
This would make the product cheaper to produce. The technology used to make the product is very advanced and some of the staff would have to move to Country A.
The Production Director has identified that there are some political risks in moving to Country A.
Match the methods of reducing the political risks associated with the move to Country A with the corresponding risks.
Answer:
Explanation:
NEW QUESTION 161
WTW is a global company which produces high-tech equipment such as smart televisions and mobile phones The CFO has just resigned, having been offered a post at a competitor The CFO was well regarded and WTWs share price has fallen in response to the announcement At a board meeting the production director commented that the share price fall is the fault of the nomination committee Which THREE of the following statements are correct?
- A. Most of the members of the nomination committee should be executive directors as they are responsible for ensuring the share price recovers quickly.
- B. When planning the CFO's replacement the nominations committee should consider the diversity of the board
- C. The nomination committee should have considered succession planning for directors before the CFO resigned
- D. The nomination committee should prepare a description of the role and capabilities required for the CFO's replacement
- E. If the nomination committee had been working effectively the CFO would not have resigned
Answer: B,C,D
NEW QUESTION 162
P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 million at a discount rate of 10% as shown in the table below:
However, management is unsure about the demand for the product which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years
1,2, and 3 cash inflows respectively.
What should P do?
- A. Stop the project, it has considerable risk.
- B. Put pressure on sales and marketing to re-verify their forecasts.
- C. Proceed with the project, it has a healthy net present value.
- D. Re-appraise the project using other capital appraisal techniques to get a more balanced view.
Answer: D
NEW QUESTION 163
Laura is an accounts clerk. She is supposed to sign each invoice as evidence that she has conducted checks against supporting documents. Sometimes Laura signs invoices without making these checks.
Terry is a member of the internal audit team. Terry has been told to conduct compliance tests on whether Laura is checking the invoices properly.
Which of the following would give Terry a false sense of assurance that Laura's checks have been operating?
- A. Terry examined a sample of invoices to make sure that they had been signed by Laura. All had been signed.
- B. Terry reviewed a sample of invoices for purchases of plant and equipment and found that Laura had not signed them. Laura explained that she believed that those were authorised by someone else, although the accounts manual indicates that it was her responsibility.
- C. Terry worked at a spare desk in the accounts department and quietly watched Laura without telling her.
She checked every invoice carefully while Terry was present. - D. Terry asked Laura a series of open-ended questions about the operation of the purchases system. She did not mention anything about detailed checks of invoices against documents.
- E. Terry selected a sample of purchase invoices and compared each to the supporting documents that Laura is supposed to review. Every one of Terry's invoices was supported by the related documents.
Answer: A,C,E
NEW QUESTION 164
THG is a quoted company that manufactures expensive clothes that are sold to upmarket department stores THG's Board has commissioned a stress test to identify the impact of strategic risks The consultant who is conducting the test is currently investigating the impact that a 1 % increase in interest rates would have on THG.
Which TWO of the following are valid reasons for including an increase in interest rates in the stress test?
- A. Interest rates affect consumers' disposable income
- B. Many of the retailers who resell THG's clothes are highly geared
- C. Stress testing was first developed for bank supervision.
- D. THG is highly geared.
- E. THG might change its prices if interest rates rise
Answer: A,D
NEW QUESTION 165
The treasurer of IOK is considering entering into a money market hedge in order to hedge a payable.
Which of the following might be valid explanations for the use of a money market hedge for this purpose?
- A. A money market hedge is easier and less expensive to organise than a future or forward contract.
- B. Money market hedges can be unwound whereas positions in derivatives cannot.
- C. The timing of the payable does not permit the use of a forward contract.
- D. The relevant currency markets are very thinly traded and the treasurer believes that forward contracts are mispriced.
- E. There are no forward contracts available for the purchase of the payable currency using IOK's home currency.
Answer: C,D,E
NEW QUESTION 166
A UK manufacturing company has simultaneously:
* purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65
* sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61 (this option has the same maturity date as the put).
Which of the following is a valid explanation for entering into these option positions?
- A. The company expects to pay USD 1million to a supplier and wishes to offset the premium from the call option against the cost of the put option.
- B. The company expects to receive USD 1million from a customer and wishes to obtain an additional benefit if the USD strengthens beyond GBP 1.00 = USD 1.61.
- C. The company expects to receive USD 1million from a customer and wishes to offset the cost of the put option by the premium on the call option.
- D. The company expects to pay USD 1million to a supplier and wishes to obtain additional protection against the USD strengthening beyond GBP 1.00 = USD 1.65.
Answer: C
NEW QUESTION 167
Select the most appropriate level of responsibility for managing each of the following risks.
Answer:
Explanation:
NEW QUESTION 168
In relation to the use of the adjusted present value (APV) technique, which of the following statements are correct?
- A. The interest tax shield on the project's debt must be known, or at least estimated.
- B. The weighted average cost of capital - net present value technique and the APV technique will, if applied correctly, give the same answer.
- C. To apply APV, the proportions of debt and equity in the capital structure must be known.
- D. To apply APV the actual amounts of debt and equity in the capital structure must be known.
Answer: A,B
NEW QUESTION 169
The list below has duties performed by risk managers and internal auditors. Show who would carry out the duties assuming the company has both risk managers and internal auditors.
Answer:
Explanation:
NEW QUESTION 170
R plc is considering an investment of $1,100,000 in a new machine which is expected to have substantial cash inflows over the next five years.
The annual cash flows from this investment and their probability are shown below:
Annual cash flow ($) Probability
200,000 0.4
280,000 0.5
350,000 0.1
At the end of its five-year life, the asset is expected to sell for $100,000. The cost of capital is 5%.
What is the Expected Net Present Value?
Give your answer to the nearest whole $.
Answer:
Explanation:
$82295, $82550
NEW QUESTION 171
Which TWO of the following are NOT methods used for risk identification?
- A. Employing external advisors with specialist knowledge
- B. Designing a process to deal with complaints
- C. Brainstorming ideas with colleagues from different disciplines within the business
- D. Carrying out interviews on key members of staff
- E. Accounting for waste in a manufacturing process
Answer: B,E
NEW QUESTION 172
A consultancy firm has many overseas clients The firm's staff are responsible for booking travel and accommodation through an independent travel agent who invoices the firm. There are strict rules governing bookings Staff at all levels must book economy class airfares unless the scheduled flight time is greater than eight hours, in which case they can book a business class seat Hotel accommodation should cost less than $300 per night One of the firm's directors is visiting the consultancy team responsible for a large overseas project The director flew business class, even though the flight took only five hours The director is booked into an executive suite at an expensive hotel at a cost of $900 per night Which TWO of the following statements concerning the director's behavior are correct?
- A. Directors are not required to adhere to company policies in the same manner as more junior staff
- B. The travel agent's invoice should be queried by the consultancy's administrative staff.
- C. Only the staff engaged on this project will be aware of the director's behavior
- D. In future, all staff should be permitted to fly business class and use more luxunous hotels
- E. Staff may be encouraged to book more expensive flights and accommodation in the future
Answer: B
NEW QUESTION 173
E purchases parts for one of the machines it manufactures from Country X Place the risk classification next to the risk it relates to:
Answer:
Explanation:
NEW QUESTION 174
Which of the following actions would breach CIMA's Code of Ethics for Professional Accountants?
- A. An accountant has been asked to select a new supplier and has decided to recommend a supplier based in country A because that will give the accountant an excuse to visit a family member who lives there.
- B. An accountant has been asked to compile a list of all contacts at the company's bank so that they can be included in the mailing list for the calendar and coffee mug that are distributed as business gifts by the company in December of every year.
- C. An accountant has been asked to confirm that a complex financial instrument that has been recommended by the bank is suitable for the company. The accountant does not understand the instrument, but has confirmed its suitability because senior management wishes to use it.
- D. An accountant has been asked to identify the two least profitable factories so that they can be closed down, with the loss of all jobs. All of the company's factories are located in areas of high unemployment.
- E. An accountant has been asked to evaluate an investment opportunity that is open for a very short time.
The accountant has recommended rejecting the opportunity without doing any evaluation because he was too busy to study the proposal properly.
Answer: A,C,E
NEW QUESTION 175
M is a multinational IT company with headquarters in Asia and with operations in all continents.
It is now trying to expand its operations in Europe. This is seen as a major challenge as the European market is very well developed with established players in fierce competition against each other.
As well as developing and producing its own products, it sources products across Asia, America and Europe as part of infrastructure deals which have to include as much of its own equipment as possible. In doing this, transfer prices can be set in YEN, USD, EURO, GBP. Transfer prices are revised every month in line with production times as most goods are made on short order times with sales cycles running at 3-4 months.
The longer sales cycle against committed transfer pricing presents problems as customers expect quotes to be valid for 90 days whereas M's suppliers reserve the right to revise pricing at the end of every month with quotes only valid for 8 days in the following month.
How should M deal with this problem?
- A. Use a centralised treasury function to set up unilateral netting so that all trades can be balanced off against each other before any money is transferred.
- B. Offer a small discount for any customers who pay in M's home currency.
- C. Do nothing, everyone is in the same situation.
- D. Incentivise sales persons to be more accurate when forecasting prices.
Answer: A
NEW QUESTION 176
B uses a balanced scorecard to monitor the performance of its divisions.
Classify each of the following decisions taken by a division's management team as either commercially sound or dysfunctional.
Answer:
Explanation:
NEW QUESTION 177
KLO is a major quoted car rental company The company is considering publishing its first cyber risk management report AH rental bookings are made online Customers receive a booking reference number that they use to collect their cars from a convenient branch Customers enter their credit card details both so that KLO can take payment for their rental and also so that the customers can be charged automatically for late returns or damage to cars KLO's management believes that it has three key areas of cyber risk Cyber criminals may wish to make bookings using fictitious data in order to steal KLO's cars, they may wish to use customers details to identify addresses of people who are away from home so that they can burgle houses and they may wish to abuse customer credit card details KLO's Board is concerned that admitting to the nsk of stealing cars might encourage cnminals to exploit that vulnerability AJso. it is concerned that customers will be reluctant to rent cars if that would mean that their homes could be at risk of burglary while they are away The vulnerability of credit card details seems obvious and so the Board is not reluctant to admit to that.
Which TWO of the following are correct?
- A. The Board should be clear about all sensitive information that the company holds, but should also be clear about the robust controls in place to safeguard that information.
- B. The independent accountant's report on KLO's cyber risk management will refer only to those vulnerabilities that have been identified by KLO's Board
- C. If KLO's Board omits one of more areas of concern from the report then the independent accountant who will sign the report is unlikely to discover that omission
- D. Stakeholders will not care about the vulnerabilities faced by KLO provided the independent accountant can confirm that the company has sound systems in place
- E. The independent accountant who will express an opinion on the risks and controls will be unwilling to sign the report unless it contains a full account of all risks and controls
Answer: A,E
NEW QUESTION 178
Which of the following summarises Purchasing Power Parity Theory (PPPT)?
- A. The difference between the spot and the forward exchange rates is equal to the differential between the inflation rates in the two countries.
- B. PPPT predicts that the country with the lower inflation rate will see the currency devalue accordingly.
- C. Government intervention cannot affect the inevitable rise or fall of its currency in the short-term.
- D. The difference between the interest rates in the two countries is equal to the differential between the spot and the forward exchange rate for the currency in the two countries.
Answer: A
NEW QUESTION 179
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