Free Practice CIMA CIMAPRO19-F03-1-ENG Exam Questions 2025

Stay ahead with 100% Free F3 Financial Strategy CIMAPRO19-F03-1-ENG Dumps Practice Questions

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Total 305 Questions | Updated On: Jun 06, 2025

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Question 1

M is an accountant who wishes to take out a forward rate agreement as a hedging instrument but the company treasurer has advised that a short-term interest rate future would be a better option. Which of the following is true of a short-term interest rate future?

A : It can be tailored to the exact reeds of the company.

B : It interest rates have gone down the price of the future will have fallen.

C : It must be kept for ne whole duration of the contract

D : The date is flexible and the position can be closed quickly and easily.

Answer: C

Question 2

A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bank borrowing as the discount

rate.

Details of the two alternatives are as follows:

Buy option:

• To be financed by a bank loan

• Tax depreciation allowances are available on a reducing-balance basis

• Assets depreciated on a straight-line basis

Lease option:

• Finance lease

• Maintenance to be paid by the lessee

• Tax relief available on interest payments and book depreciation

Which THREE of the following are relevant cashflows in the lease-or-buy appraisal?

A : Tax relief on tax depreciation allowances

B : Bank loan payments

C : Maintenance payments

D : Lease payments

E : Tax relief on the book depreciation

Answer: A,D

Question 3

A company is funded by:

• $40 million of debt (market value)

• $60 million of equity (market value)

The company plans to:

• Issue a bond and use the funds raised to buy back shares at their current market value.

• Structure the deal so that the market value of debt becomes equal to the market value of equity.

According to Modigliani and Miller's theory with tax and assuming a corporate income tax rate of 20%, this

plan would:

A : increase the company's asset beta.

B : decrease the company's equity beta.

C : increase shareholder wealth.

D : increase the market value of the company's equity.

Answer: C

Question 4

An entity prepares financial statements to 31 December each year. The following data applies:

1 December 20X0

• The entity purchased some inventory for $400,000.

• In order to protect the inventory against adverse changes in fair value the entity entered into a futures

contract to sell the inventory for a fixed price on 31 January 20X1.

• The entity designated this contract as a fair value hedge of the value of the inventory.

31 December 20X0

• The inventory had a fair value of $480,000 and the futures contract had a fair value of $75,000 (a financial

liability).

What will be the impact on the statement of profit or loss and other comprehensive income for the year ended

31 December 20X0 in respect of the change in the value of the inventory and the futures contract?

A : A loss of $75,000 will be recognised in profit or loss.

B : A loss of $75,000 will be recognised in other comprehensive income.

C : A net gain of $5,000 will be recognised in profit or loss.

D : A net gain of $5,000 will be recognised in other comprehensive income.

Answer: C

Question 5

Company A is a listed company that produces pottery goods which it sells throughout Europe. The pottery is

then delivered to a network of self employed artists who are contracted to paint the pottery in their own homes.

Finished goods are distributed by network of sales agents.The directors of Company A are now considering

acquiring one or more smaller companies by means of vertical integration to improve profit margins.

Advise the Board of Company A which of the following acquisitions is most likely to achieve the stated aim

of vertical integration?

A : A company in a similar market to Company A.

B : A pottery factory in the Middle East.

C : A company that produces accessories.

D : A listed international logistics firm.

Answer: D

Page: 1 / 61

Total 305 Questions | Updated On: Jun 06, 2025

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