CIMA CIMAPRA19-P03-1-ENG P3 Risk Management (Online) Online Training
CIMA CIMAPRA19-P03-1-ENG Online Training
The questions for CIMAPRA19-P03-1-ENG were last updated at Nov 20,2024.
- Exam Code: CIMAPRA19-P03-1-ENG
- Exam Name: P3 Risk Management (Online)
- Certification Provider: CIMA
- Latest update: Nov 20,2024
The managers of a company are agents for the shareholders tasked with increasing shareholders’ wealth.
Which of the following will usually increase shareholders’ wealth?
- A . Investing in projects with the shortest payback period.
- B . Investing in projects with positive net present value.
- C . Investing in projects with the greatest level of risk.
- D . Not paying a dividend for several years in order to invest in new projects.
H Ltd is a logistics company which is likely to be seeking a Stock Exchange listing shortly.
The directors wish to strengthen the company’s internal controls.
Which of the following statements are valid?
- A . The Board should take direct responsibility itself for all organisational control and avoid delegating.
- B . The Board should ensure that the internal accounting system provides accurate and relevant information.
- C . The Board should ensure that there is regular assessment of the financial impact of contingencies.
- D . The Board should communicate organisational policies only to members of staff who are part of the management team.
- E . Internal Audit should be used to check on the detailed operation of controls in the
operating departments.
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 . Proceed with the project, it has a healthy net present value.
- B . Stop the project, it has considerable risk.
- C . Put pressure on sales and marketing to re-verify their forecasts.
- D . Re-appraise the project using other capital appraisal techniques to get a more balanced view.
DRAG DROP
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.
An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.
Which of the following best explains the relevance of quantifying the risk in that way?
- A . There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.
- B . The probability is so low as to be ignored.
- C . The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.
- D . The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.
A project requires a capital investment of £2.7million. The project will save £450,000 each year after taxation. Assume the savings are in perpetuity. The business risk of the venture requires a 15% discount rate. The company has to borrow £1million to finance the project at a rate of 9% and the net tax shield is 30%, the project supports debt which generates an interest tax shield of 0.30 x 0.09 x £1million, which is £27,000 per year in perpetuity.
Calculate the project’s adjusted present value.
- A . £(30,000)
- B . 0
- C . £570,000
- D . £600,000
DRAG DROP
Select the most appropriate level of responsibility for managing each of the following risks.
An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.
Which of the following best explains the relevance of quantifying the risk in that way?
- A . There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.
- B . The probability is so low as to be ignored.
- C . The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.
- D . The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.
N, a large company in the food production industry, has grown over the years by the acquisition of several smaller rivals. The company has ten branches located in its home country and has just opened a foreign branch for the first time. It has recently made some changes to the structure and implementation of its control system.
Which TWO of these would be most likely to improve the overall control system?
- A . Establishing an Internal Audit department.
- B . Purchase invoices are now approved for payment at branches and a list of approved invoices are sent to head office for payment. The invoices, supporting documentation and suppliers’ statements are retained at the branches.
- C . Excess funds are now invested, by the Finance Director, in short-term securities. The Finance Director initiates buy and sell transactions and she also receives and retains all correspondence relating to the investments.
- D . A policy has been initiated to complete a physical inventory of all non-current assets at least annually. This is then reconciled with the non-current asset register.
- E . N has just opened a bank account in the currency in which the newly opened branch is now operating.
DRAG DROP
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.
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