Question 1

The International Integrated Reporting Council (IIRC) was formed in August 2010 and brings together a

cross-section of representatives from a wide variety of business sectors.

The primary purpose of the IIRC's framework is to help enable an organsation to communicate how it:

Options :

A : minimises the environmental impact of its business processes.

B : creates value in the short, medium and long term.

C : contributes positively to the economic well being of the environment in which it operates.

D : ensures that the conflicting needs of different stakeholder groups are met in an optimal manner.

Answer: B

Question 2

The Board of Directors of Company T is considering a rights issue to fund a new investment opportunitywhich has a zero NPV.The Board of Directors wishes to explain to shareholders what the theoretical impact on their wealth will be asa result of different possible actions during the rights issue.Which THREE of the following statements in respect of theoretical shareholder wealth are true?

Options :

A : If shareholders exercise their full rights there will be no impact on their wealth.

B : If the shareholders allow their rights to lapse (do nothing) there will be no impact on their wealth.

C : If shareholders sell their entire rights entitlement there will be no impact on their wealth.

D : If the shareholders only partially exercise their rights and allow the remainder to lapse there will be no impact on their wealth

E : If shareholders partially exercise their rights and sell the remaining rights entitlement there will be no impact on their wealth.

Answer: A,C

Question 3

A company has just received a hostile bid. Which of the following response strategies could be considered?

Options :

A : Revalue non-current assets

B : Poison pill strategy

C : Change the Articles of Association to amend voting rights

D : Approach a White Knight

Answer: D

Question 4

A is a listed company. Its shares trade on a stock market exhibiting semi-strong form efficiency.Which of the following is most likely to increase the wealth of A's shareholders?

Options :

A : Announcing that a project will be undertaken generating a positive net present value.

B : Announcing that the final dividend will remain unchanged from the previous 3 years.

C : Announcing that a non-current asset will be revalued in the statement of financial position.

D : Announcing that inventory will be impaired.

Answer: A

Question 5

Which THREE of the following statements are correct?

Options :

A : A portfolio can be diversified by increasing the number of securities in different industries held in the portfolio.

B : Systematic risk can be eliminated in a diversified portfolio.

C : The beta of a company-s shares reflects systematic risk.

D : A beta of 1 indicates that the investment is risk free.

E : The security market line (SML) shows the relationship between systematic risk and return.

Answer: A,C

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