CIMA CIMAPRA19-P03-1 Exam Practice Test Instant Access

Question 1

A project has a net present value of $2 million.

Total cash outflows of this project have a present value of $14 million, which includes staff costs of $10 million.

What is the project's sensitivity to staff costs?

A20%

B63%

C71%

D14%

Answer : A

Question 2

Which of the following statements concerning the role ofa non-executivedirector (NED) is correct?

AIndividual NEDs should be on at least five boards if possible so as to give them wide experience.

BNEDs are not responsible for determiningexecutive directors' remuneration.

CNEDs should satisfy themselves on the integrity of financial information and should develop the control systems to ensure that integrity is maintained.

DNEDs have a key role in removing executive directors.

Answer : D

Question 3

Z plc has recently undertaken a SWOT analysis. The SWOT analysis identified two main threats to Z plc:

* The threat that the currency of Z plc's main overseas competitor weakens compared to Z plc's home currency.

* The threat that there will be a military coup which will overthrow the government in the country that Z plc purchases most of its raw materials from.

WhichTWOof the following categories of risk correspond most closely to the above threats?

AFinancial risk

BPolitical risk

CBusiness risk

DEconomic risk

Answer : B, D

Question 4

The managers of a company are agents for the shareholderstasked with increasing shareholders' wealth. Which of the following will usually increase shareholders' wealth?

AInvesting in projects with the shortest payback period.

BInvesting in projects with positive net present value.

CInvesting in projects with the greatest level of risk.

DNot paying a dividend for several years in order to invest innew projects.

Answer : B

Question 5

Company C wishes to recruit an employee who will have responsibility for, among other things, the receipt and handling of cash.Which THREE of the following would be most likely to provide useful information about the candidate from the point of view of the Internal Auditor?

AThe candidate's academic qualifications.

BReferences from previous employers of the candidate.

CThe candidate's personal referees.

DThe candidate's membership of a professional body.

EConfirmation that the candidate does not have a criminal record.

Answer : B, D, E

Question 6

Division A of X plc produced the following results in the last financial year.

Net profit $200,000 Gross capital employed$1,000,000

For evaluation purposes all divisional assets are valued at original cost.

The division is considering a project that has a positive NPV, will increase annual net profit by $15,000, but will require average inventory levels to increase by $50,000 and non-current assets to increase by $50,000.

Xplc imposes a 16% capital charge on its divisions. Given these circumstances, will the evaluation criteria of return on investment (ROI) and residual income (RI) motivate divisionAmanagers to accept the project?

AROI Yes RI Yes

BROI Yes RI No

CROI No RI Yes

DROI No RI No

Answer : D

Question 7

Physical access controls can greatly enhance the security of company assets.

SelectTHREE methods by which physical access security can be significantly enhanced.

AUse of CCTV cameras monitoring all access points, with security guards monitoring images and a secured system making a recording.

BUse of one way mirrors, so people can be observed undetected.

CUse of USB sticks and removable media should be prohibited.

DUse of access control pads with numerical keys on every door, which is otherwise locked.

EPersonal individual ID card access, logging individual person movement through every door, which is otherwise locked.

FVisitors to be logged in by security staff and to be accompanied by a member of staff at all times until they leave.

Answer : A, E, F

CIMAPRA19-P03-1 P3 Risk Management (Online) Exam Practice Test