CIMA CIMAPRA19-P03-1 Value Pack (Frequently Bought Together)

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. $95,000 gain
• B. $88,000 gain
• C. $16,000 loss
• D. $62,000 gain

W is a construction company which undertakes large projects for governments and other clients worldwide. Following extensive tendering processes, contracts are issued for successful tenders, and projects typically take three to five years to complete. Contracts are normally fixed-price and many have considerable penalty clauses.
Which of the following would be appropriate policies and controls for W to implement?

• A. Ensuring a consistent separation of duties between those involved in the preparation of tenders and those involved in the planning of projects.
• B. The project steering committee and project board should receive regular project status reports.
• C. Unsuccessful tenders should be analysed to establish the cause of them failing to be awarded the work and help to avoid future failures.
• D. Contract terms should be worded precisely so that additional work is not deemed to form part of the contract.
• E. Ensuring that the minimum legal wage is paid to all workers on the construction sites.
• F. In order to ensure the maximum chance of winning the contract, tenders always commit W to completing the work at the lowest possible price and in the shortest possible time.

J plc is a wholesale building supply business. It has a large warehouse where some of its materials are stored. Last month three accidents occurred where employees were slightly injured whilst moving items from the 5th shelf. The 5th shelf is located 15 metres up from the ground.
This is a health and safety risk and could also be a reputation risk in the longer term.
Which of the following risk mitigations should the company employ?

• A. Accept by just accepting this is a risk the company has to take and some employees may get injured.
• B. Avoid by sending the employees on a training course on Health and Safety.
• C. Transfer by insuring against this risk.
• D. Reduce by storing some items on the first three shelves and storing other items outside.

Which TWO of the following are NOT methods used for risk identification?

• A. Accounting for waste in a manufacturing process
• B. Designing a process to deal with complaints
• C. Carrying out interviews on key members of staff
• D. Brainstorming ideas with colleagues from different disciplines within the business
• E. Employing external advisors with specialist knowledge

The shares of a company have a beta factor of 1.15. Therefore, which of the following must be true?

• A. The shares have more unsystematic risk than the stock market average.
• B. The shares have more total risk than the stock market average.
• C. The shares have less unsystematic risk than the stock market average.
• D. The shares have more systematic risk than the stock market average.