Question 1

TU has relatively few tangible assets and is dependent for profits and growth on the high-value individuals it employs. Which of the following statements best explains why the net asset valuator method’s considered unstable for TU?

Options :

A : TU does not account for its tangible assets

B : TU does not account for its intangible assets.

C : TU accounts for its intangible assets at net realisable value.

D : TU accounts for its intangible assets at historical value.

Answer: B

Question 2

An unlisted company operates in a niche market, exploring the west coast of Africa for new oiI reservoirs.

The oil exploration program has been successful in recent years and t now has a substantial amount of oil

reserves with a high level of certainty of being recoverable Under financial reporting regulations, oil still in the

ground is not recognised as an asset unit is extracted.

The expense of the exploration program has used up all the company’s available cash resources.

The company has denied to list or a stock market and raise finds through an initial public offering to finance

its drilling program.

Which of the following valuation methods in the appropriate to use in calculating an initial listing price for this

company?

Options :

A : Market capitalisation.

B : Framings valuation using the ratio of a multinational oil exploration company

C : Net asset valuation based on book values.

D : Discounted cash flow valuation

Answer: D

Question 3

Which THREE of the following are considered in detail in IFRS 7 Financial Instruments: Disclosures?

Options :

A : Credit risk

B : Business risk

C : Market risk

D : Enterprise risk

E : Liquidity risk

Answer: A,C

Question 4

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 5

Two listed companies in the same industry are joining together through a merger.

What are the likely outcomes that will occur after the merger has happened?

Select ALL that apply

Options :

A : Increase in customer base.

B : Competition authorities step in to stop a potential price monopoly.

C : Decrease in employee motivation due to internal changes.

D : Changes to supplier relationships owing to internal changes.

E : Cost savings from synergistic benefits and economies of scale.

Answer: A,C,D

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