Question 1

COM is a well established company in the construction industry The company was founded by the Mac family 30 years ago and several family members still serve on the Board The company obtained a listing five years ago The Board has an appropriate balance between executive and non-executive members It also has audit remuneration and nomination committees The average age of board members is 68

COM is profitable but profit margins have been falling steadily and this year's revenues are lower than it was achieved last year The Board recognis thai it does not have a long term strategy in place and has been losing business to newer, more aggressive competitors

Which THREE of the following statements are correct?

Options :

A : The remuneration committee should consider incentives such as share options to encourage the Board to focus on COM-s long term strategy

B : The nomination committee should have had a succession plan in place for directors.

C : The nomination committee should be operating for the benefit of the directors.

D : The audit committee should have alerted the Board to the impact of falling profit margins

E : The non-executive directors should have challenged the lack of long term strategic planning

Answer: A,B

Question 2

Which of the following statements best explains why a corporate treasury department should be established as a cost centre rather than a profit centre?

Options :

A : The Treasury Department should not be encouraged to speculate.

B : The Treasurer should not have a great deal of responsibility.

C : There is no way for the Treasury Department to generate revenue.

D : The Treasurer has the ability to manipulate the Department-s reported profit.

Answer: A

Question 3

Which of the following is an ethical dilemma?

Options :

A : A company is considering giving poorly-paid staff a generous pay rise.

B : A company is deciding whether to issue debt or equity.

C : A company is deciding whether to make a substantial bonus payment to its directors by means of cash or shares.

D : A company must decide whether to settle a claim from an employee who appears to have fabricated a workplace injury. The company want to avoid the cost of defending the claim.

Answer: A

Question 4

R is a company running gas-fired power stations in Western Europe. The Risk Committee hasjust received a reportthata power station built to the same design and specification in a developing country has recently collapsed. The causes of the collapse are unclear,but if something similiar were to happen in Europe the consequencesfor Rcould be catastrophic.

Which of the following actions being considered by the Risk Committee are ethical?

Options :

A : Commission a reputable firm of structural engineers to carry out a review of all power stations owned by R.

B : Decide that the information available to date is too uncertain to take any action for now.

C : Send experts employed by R to the site of the collapse so that they can gather information first hand on what happened.

D : Issue a press release confirming that all R-s power stations are 'entirely safe'.

E : Attempt to increase the level of insurance cover against this type of eventuality.

F : Draw up contingency plans in case some ofR-s power stations need to be shut down.

Answer: A,C

Question 5

FGT is evaluating the political risks associated with its operations around the world.

Which of the following would indicate that a particular subsidiary has a high level ofpolitical risk?

Options :

A : Forthcoming elections in the subsidiary-s host country.

B : The subsidiary-s host country requires the active participation of local partners before the subsidiary can operate.

C : Company law in the subsidiary host country is lax.

D : The subsidiary islocated a considerable distance from FGT-s home country.

E : Thesubsidiary employs a large number of nationals from the host country.

Answer: A,B,C

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