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Valid CIMAPRO19-CS3-1 Exam Objectives | Exam CIMAPRO19-CS3-1 Flashcards
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CIMA Strategic Case Study Exam Sample Questions (Q29-Q34):
NEW QUESTION # 29
You have received the following email from Marcus Svenson, Finance Director:
From: Marcus Svenson, Finance Director
To: Senior Finance Manager
Subject: Biomass proposal
Hi,
The Board has just heard a presentation by an engineering consultancy concerning a proposal to develop a biomass power station adjacent to our North Forest.
The Board has asked us to put together some thoughts about the merits of this proposal. We would proceed on the basis that we would build the power station and sell the resulting electricity to the national power generator which has a number of coal-fired power stations, each of which is nearing the end of its useful life and the coal has to be shipped in, so we should find it relatively easy to guarantee sales. The power generator has indicated that it would be possible to negotiate a three year contract in the first instance, with the expectation that this would be extended by subsequent three year contracts, subject to price and performance.
We would be responsible for building and operating the power plant and we would also have to pay for 50% of the cost of power lines for connecting to the national electricity grid, with the other 50% being funded by the national power generator.
Please draft a briefing paper that I can present to the Board on the following:
How can we predict whether the share price is likely to increase or decrease if we commit ourselves to this project? You should identify the challenges associated with answering that question and indicate how we might address them.
What are the long-term risks associated with future revenues from the sale of electricity? How might we manage these?
Marcus
Reference Material:
Answer:
Explanation:
Complete your answer and submit
NEW QUESTION # 30
William Seaton, the Director of Finance stopped you in the corridor a week after the Head Geologist's announcement that reserves had been overstated:
"We informed the stock exchange that our reserves had been downgraded and our share price has taken a solid hit. We need to work towards making sure that this is never repeated.
The Board is actively considering some changes that we hope will improve our forecasting system. I am not convinced that the suggestions will work. Frankly, if we could predict the future with certainty then I would have us stop looking for oil and start selling forecasts.
I would like you to work through the proposals that have been put forward and to recommend on their adoption, with changes if you think it necessary. The issues that we are most seriously considering are:
* A suggestion that Big Data could be used to monitor oil prices. Do you think this would be a sensible way to proceed?
* A suggestion that we should update our reserves information on the company website in real time. Do you think that would be an effective communication strategy?
* Finally, we have considered a number of issues surrounding the motivation and inspiration of our geologists. Two quite distinct schemes have been proposed. Firstly, some Board members believe that our geologists should be rewarded in relation to the accuracy of their forecasts. Bonuses will be paid on the basis of correct initial evaluation of wells. The bonus will increase if a well that was initially identified as commercially viable goes into production and will decrease if a well that was classified as viable is reclassified as unproductive.
Secondly, other members of the Board believe that there should be a greater degree of accountability on the part of geologists. The incorrect classification of a well's potential could be treated as a disciplinary matter. Please provide a detailed analysis of EACH of those suggestions."
Answer:
Explanation:
Complete your answer and submit
NEW QUESTION # 31
The Director of Finance, William Seaton, has stopped you in the corridor:
"Your report was really helpful, but the Board is still considering the implications of that email from Jan Archibald at Fouce Oil. I need to make a more detailed report to the Board and I would like you to draft it for me.
I know that we have owned and operated oil wells in the past, but that has always been with the intention of finding a buyer who is prepared to pay a realistic price. We have chosen never to think about the implications of keeping wells.
I need a report from you that covers the following issues:
* The key political risks of retaining our interest in these oil wells, with particular emphasis on high consequence, high likelihood risks.
* A suitable response to each of your political risks.
* An overview of how changes in the global economy and the demand for oil could affect the decision to proceed.
* The challenges associated with putting together a management team to take charge of the production side of this proposed new strategy.
I realise that this is a lot to ask of you, but I need you to move quickly because of the interest from our biggest shareholder."
Answer:
Explanation:
Complete your answer and submit
NEW QUESTION # 32
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:
Complete your answer and submit
NEW QUESTION # 33
You are sitting in your office when you hear Marcus Svenson, the Finance Director, speaking on the telephone. You can hear only Marcus' side of the conversation:
"Hello, I would like to speak to Sally Walker please. It is Marcus Svenson here. (pause) Hi Sally, you contacted me six months ago to discuss a job opportunity that you thought I'd be suitable for. I said that I didn't wish to pursue it at that time because I was committed to Wodd. Things have changed since then and I would like to be considered for a finance directorship in another company. (pause) Yes, I'm still with Wodd. (pause) Yes, I realise that there was an unfortunate story in the business press about the problems that the weak USD is causing us, but there was very little that I could do to prevent that. (pause) I am sorry to hear that. I had hoped to move on." (sound of telephone hanging up and door opening) Marcus discovers that you are sitting at your desk and realises that you would have heard his side of the call.
"Please don't tell anybody what you heard. Would you regard it as unethical to respect my privacy?
I suspect that the CEO knows that I am thinking of leaving. He commented on the need for Board members to be loyal to Wodd at the last Board meeting. But don't you agree that the shareholders can better protect themselves against currency fluctuations than the directors?
The crazy thing is that I suspect that the Chairman will dismiss me next month. If that happens, I get a year's salary as a severance package. That will really annoy the shareholders. How can I justify accepting the severance package if I am effectively being dismissed for failing to manage Wodd's finances properly?
I need to explain at the next Board meeting why it would have been difficult to evaluate the risk of the USD weakening. According to an article I read, it has been picked up as a serious problem for us. How would you advise me to explain that?" Reference Material:
Answer:
Explanation:
Complete your answer and submit
NEW QUESTION # 34
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