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CIMA Risk Management Sample Questions (Q22-Q27):
NEW QUESTION # 22
Company X has been advised by its internal audit team that it should have a fraud response policy A is a new member in the internal audit team and he does not see why this would help to prevent fraud and has asked for an explanation Which TWO of the following would be included in this explanation? It would act as a deterrent and help prevent staff from committing fraud
- A. It would be part of the internal control system of the company
- B. It would show that the company is taking the risk of fraud seriously.
- C. It would clarify the role of various staff in detecting fraud
- D. It would lay down processes and procedures that internal audit should follow if they suspect fraud
Answer: A,D
NEW QUESTION # 23
RFG is considering a major expansion that will result in a more diversified business model.
At present, RFG’s market capitalisation is $240 million. This is based on a beta of 1.6. The risk free rate is 4% and the market rate of return is 9%. RFG is financed entirely by equity. The company generates an annual cash surplus of $28.8 million.
The expansion will cost $50 million and will generate future cash flows of $12 million in perpetuity. This new business will reduce RFG’s beta to 1.4.
Calculate the adjusted present value of the expansion.
- A. $81 million
- B. $59 million
- C. $321 million
- D. $131 million
Answer: A
NEW QUESTION # 24
R is a manufacturer of biscuits. The market for biscuits is extremely competitive with many companies competing for contracts with large supermarkets. The intensity of the competition means that prices are kept low; and the buyers can demand higher levels of quality, and greater flexibility in supply arrangements.
Which of the following represent ways that the use of an Information System could help R to win and retain supermarket contracts in such a competitive market?
- A. If R’s system is integrated to that of a particular supermarket then other supplier’s systems cannot also be integrated to that supermarket system.
- B. It could facilitate product ordering and selection by the use of Electronic Data Interchange.
- C. It would mean that R’s products would be more prominently displayed on the supermarket shelves.
- D. If R’s system is integrated with that of a particular supermarket, then this will make it more expensive for the supermarket to change to a different supplier.
- E. It could be used to facilitate more timely and accurate delivery which would minimising waste.
Answer: B,D,E
NEW QUESTION # 25
SQH manufactures mobile phones SQH’s Board is currently undertaking a long-term planning exercise as part of the process of strategy development The Board is considering expanding the number of countries it currently exports products to.
Which THREE of the following could cause difficulty in forecasting accurately’?
- A. Pressures on management to achieve short-term results
- B. Currency changes in new and existing markets
- C. Rapidly changing mobile phone technology.
- D. Competitors will have a better understanding of potential new markets
- E. Long-term trends may be difficult to predict in this market
Answer: B,C,E
NEW QUESTION # 26
Company W produces mobile phone components and has recently tendered for a substantial contract. The results of the tendering process will not become available until three months from now. If the company is successful it will require 2,000 units of a commodity which is currently traded in an open commodity market for $740 per unit. However, there has been speculation that this commodity could increase substantially in price over the next three months and so the company is considering purchasing the commodity now and storing it for three months.
The funds to buy the commodity would be borrowed at an annual interest rate of 7% and the storage cost of the product would be $5.40 per unit per month. The storage costs would be paid at the end of the three month storage period.
Which of the following represents the gain or loss (to the nearest thousand dollars) that will accrue to Company W assuming that the price of the commodity rises to $800 in three months’ time?
- A. $88,000 gain
- B. $95,000 gain
- C. $16,000 loss
- D. $62,000 gain
Answer: D
NEW QUESTION # 27
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