P3 Practice Exam Tests Latest Updated on Mar-2022
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NEW QUESTION 21
Which of the following risks should be given highest priority?
- A. Risks which have a high impact and which may arise occasionally
- B. Risks which have a high impact and have a low likelihood of arising
- C. Risks which have a low impact but which arise frequently
- D. Risks which have a low impact and a low likelihood of arising
Answer: A
NEW QUESTION 22
Select the correct ethical principle that corresponds to each ethical dilemma described.
Answer:
Explanation:
NEW QUESTION 23
Will owns $400,000 of shares in Company X.
Company X has a daily volatility of 1% of its share price.
Calculate the 28 day value at risk that shows the most Will can expect to lose during a 28 day period.
(Will wishes to be 90% certain that the actual loss in any month will be less than your predicted figure).
Give your answer to the nearest $000.
Answer:
Explanation:
$27
NEW QUESTION 24
A government department is conducting a value for money audit on a school.
The school's pupils sit leaving exams. Classify each of the audit tests as either economy and efficiency or effectiveness.
Answer:
Explanation:
NEW QUESTION 25
Which TWO of the following are reasons for a company to comply with the Committee of Sponsoring Organisations of the Treadway Commission 2017 Enterprise Risk Management Framework (COSO Framework)?
- A. Complying with the COSO Framework will mean there is a good structure to a company's risk management system
- B. Complying with the COSO Framework will improve a company's reputation
- C. Complying with the COSO Framework will mean that all staff will understand a company's risk management system
- D. Complying with the COSO Framework will mean that a company's internal controls will work properly
- E. Complying with the COSO Framework will mean all employees of a company will comply with internal controls
Answer: A,B
NEW QUESTION 26
P Ltd, a manufacturing company, is considering a new capital investment project to set up a new production line. The initial appraisal shows a healthy net present value of $6,465 million at a discount rate of 10% as shown in the table below:
However, management is unsure about the demand for the product which will be produced and has insisted that the future revenues should be reduced to certainity equivalents by taking 70%, 65% and 60% of the years
1,2, and 3 cash inflows respectively.
What should P do?
- A. Re-appraise the project using other capital appraisal techniques to get a more balanced view.
- B. Put pressure on sales and marketing to re-verify their forecasts.
- C. Proceed with the project, it has a healthy net present value.
- D. Stop the project, it has considerable risk.
Answer: A
NEW QUESTION 27
JHG manufactures inexpensive cars that compete largely on price Its cars have very basic equipment and small but economical engines JHG's Board is considering launching a luxury brand of cars that will be far better equipped, more comfortable and have much better performance Which THREE of the following would be relevant factors to incorporate into the stress testing of this new strategy to create a luxury brand?
- A. The cost of designing new cars.
- B. Potential changes in interest rates.
- C. Reductions m motorway speed limits
- D. Increased tax on vehicle emissions
- E. The need for consumer research
- F. Sales of JHG's existing range of cars
Answer: A,D,F
NEW QUESTION 28
Z is a multinational pharmaceuticals company with operations across Europe, America and Asia.
It is currently investigating the possibility of setting up a chemical and specialist production facility in South America. This would be a multi $billion investment. What steps should Z take to manage the following risks in this long term venture.
Answer:
Explanation:
NEW QUESTION 29
A US company enters into a five year borrowing with bank A at a floating rate of USD Libor plus 2%.
It simultaneously enters into an interest rate swap with bank B at 3.5% fixed against USD Libor plus 1%.
What is the hedged borrowing rate, taking the borrowing and swap into account?
Give your answer to 1 decimal place
Answer:
Explanation:
4.5%
NEW QUESTION 30
The board of OKN is considering an investment opportunity that will require the company to borrow a large amount in month 10 of the current financial year and to invest it immediately in property, plant and equipment.
This investment has a positive net present value that justifies the risk, but the directors are reluctant to invest in the project.
Why might the directors be reluctant?
- A. Future profits will be depressed.
- B. The return on capital employed for the year will be reduced if the investment is made.
- C. The return on capital employed for the year will be increased if the investment is made.
- D. The year's profit will be depressed by the amount of the investment.
Answer: B
NEW QUESTION 31
Which of the following statements concerning the use of balanced scorecards to measure divisional performance is correct?
- A. Dysfunctional behaviour is impossible because divisional managers are evaluated on so many different decisions.
- B. The input for balanced scorecard reports comes from many sources so it is not possible to misrepresent performance.
- C. Contradictory and inconsistent targets prevent balanced scorecards being a useful tool for performance evaluation.
- D. Dysfunctional behaviour is more difficult than under traditional reporting because a wide range of factors will be measured and reported.
Answer: D
NEW QUESTION 32
TLY sell building materials such as bricks sacks of concrete and paving slabs to builders Materials are kept in a large yard Customer orders are fulfilled by a team of 30 employees who use forklift trucks to move sold items to the loading bay, from where they are loaded onto lornes for dispatch to the customer The sales office prepares dispatch notes, which are used by the yard employees to identify the items that have been ordered Which TWO of the following controls would be cost-effective ways to prevent the theft of inventory by TLY's staff?
- A. Forbid staff from parking their cars in the yard
- B. Conduct random searches of yard staff when they are leaving at the ends of their shifts
- C. Have a separate buying department, whose staff do not have access to the yard to place orders for replacement inventory
- D. Install closed circuit television cameras covering the whole yard and with screens constantly monitored by security staff
- E. Have a security guard check outgoing lorry loads of materials against a dispatch note
Answer: D,E
NEW QUESTION 33
M plc is an IT company that bids for large contracts to sell computer systems and also to service existing systems. M plc's senior management has always set budgets which are hard to achieve and have made no allowances for the recession.
The economy has improved and M plc's senior managers have made the budget even more optimistic. The budgeted sales target has been increased by 40%.
In the past, sales staff have not tried to achieve the budget sales because it was generally believed that the targets were impossible to reach.
M plc has recently appointed a new Sales Director who has decided that sales staff will be dismissed if they fail to meet sales targets for three successive months. He is also looking for higher sales margins than were achieved before.
What are the likely consequences of the new Sales Director's policy?
- A. Sales staff will feel more settled and secure in their jobs.
- B. Sales staff will tender for riskier contracts.
- C. Sales staff will look for new jobs.
- D. Sales staff will be happier in their jobs.
- E. Sales staff will encroach on other sales staff territories to get more work.
Answer: B,C,E
NEW QUESTION 34
V buys vegetables and fruit from three farms located in a different part of V's country and sells them to large supermarket chains.
A recent newspaper magazine had an article on these farms showing that the farms employ illegal immigrants whose status was used by the factory's owners to force them to work for low wages and in unpleasant conditions. They are forced to live in small overcrowded caravans with no running water. They are also given meals which are cold and poor quality. These farms are located in a developed country with strong labour laws.
Classify each of the following statements as true or false.
Answer:
Explanation:
NEW QUESTION 35
R is a company running gas-fired power stations in Western Europe. The Risk Committee has just received a report that a 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 consequences for R could be catastrophic.
Which of the following actions being considered by the Risk Committee are ethical?
- A. Commission a reputable firm of structural engineers to carry out a review of all power stations owned by
- B. Send experts employed by R to the site of the collapse so that they can gather information first hand on what happened.
- C. Draw up contingency plans in case some of R's power stations need to be shut down.
- D.
- E. Issue a press release confirming that all R's power stations are "entirely safe".
- F. Decide that the information available to date is too uncertain to take any action for now.
- G. Attempt to increase the level of insurance cover against this type of eventuality.
Answer: A,B,C
NEW QUESTION 36
Move the category of risk to the box beside the risk description it best matches.
Answer:
Explanation:
NEW QUESTION 37
HIW manufactures motorcycles and has factories in several countries HIW produces several different types of motorcycle, with different models often being tailored to suit the needs of customers in specific countries HIW has identified a positive net present value project to build a new factory in Farland, which will make motorcycles for sale in Farland and for export to neighbouring countries HIW has not previously traded in Fartand or its neighbours Farland is regarded as politically and economically unstable and its currency is highly volatile against other leading currencies HIWs Board wishes to consider the interests of different stakeholder groups who will be affected by the investment in Farland The Board recognises that there could be conflict between the goals of maximising profit and of maximising shareholder wealth Which THREE of the following statements are correct?
- A. The new facility will increase earning capacity but the instability may mean profits are lower than expected.
- B. HIWs share price must rise when the Farland project is announced.
- C. Shareholder wealth the project appraisal must consider the long term the Farland economy
- D. In order to focus on profit maximisation, the appraisal needs to consider the time value of money
- E. In order to focus on maximising shareholder wealth the project appraisal must consider the long term impact of the project.
Answer: A,C,E
NEW QUESTION 38
You have just been employed as a management accountant in a small business with an annual turnover of $0.5 million.
You have a wide range of duties because the business is small.
Which of the following is an ethical risk?
- A. Being asked to buy very small gifts for key clients.
- B. Being asked to work weekends, playing golf with clients.
- C. Being asked to work weekends, taking clients to night clubs making sure they have as much alcoholic drink as they want so that they will sign contracts.
- D. Being asked to work weekends working out tenders for new contracts.
Answer: C
NEW QUESTION 39
M, a manufacturing company, has had some problems with defects in one of the main products it produces.
This product has been made by the company for many years and is very profitable. Last month it had over 300 defects reported by customers which is more than 15% of products sold. This is a reputation risk for M and is also affecting profitability.
Which of the following controls could M introduce to reduce defects and also increase profitability?
- A. M could service machinery at least once a month as recommended by the machinery supplier.
- B. M could increase the number of quality control staff.
- C. M could check all employees qualifications to ensure they are qualified for their jobs.
- D. The production director could examine one in every 10 products and sign a form to say they are satisfactory.
- E. M could introduce a procedure where quality control staff sign a form at the end of each day to say they have examined 1 in 10 products for defects and they are satisfied with the quality.
Answer: A,C,E
NEW QUESTION 40
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Cost of the CIMA P3: Risk Management Exam
The cost of the CIMA P3: Risk Management Exam is 300 US Dollars.
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