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CIMAPRA19-F03-1 Exam - Topic 1 Question 10 Discussion

A listed company in a high growth industry, where innovation is a key driver of success hasalways operated a residual dividend policy, resulting involatility in dividends due to periodic significant investments in research and development.The company has recently come under pressure from some investors to change its dividend policy so that shareholders receive a consistent growing dividend. In addition, they suggested that the company should use more debt finance.If the suggested change is made to the financial policies, which THREE of the following statements are true?
A) It may give a signal to the market that the company is entering a period of stable growth. and B) There may be a change to the shareholder profile due to'the clientele effect'. and E) The company's financial risk will increasedue to its increased use of debt finance.
C) The directors will not have to take shareholder dividend preferences into consideration in future.
D) Retained earnings have a lower cost than debt finance.

CIMAPRA19-F03-1 Exam - Topic 1 Question 10 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 10
Topic #: 1
[All CIMAPRA19-F03-1 Questions]

A listed company in a high growth industry, where innovation is a key driver of success hasalways operated a residual dividend policy, resulting involatility in dividends due to periodic significant investments in research and development.

The company has recently come under pressure from some investors to change its dividend policy so that shareholders receive a consistent growing dividend. In addition, they suggested that the company should use more debt finance.

If the suggested change is made to the financial policies, which THREE of the following statements are true?

Show Suggested Answer Hide Answer
Suggested Answer: A, B, E

by Serina at May 09, 2022, 03:55 AM

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Elise
10 months ago
Wow, E is surprising! More debt means more risk, right?
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Jovita
10 months ago
D is misleading, retained earnings can be costly too!
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Lou
11 months ago
C doesn't make sense, directors always consider shareholder preferences.
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Anissa
11 months ago
Totally agree with B, clientele effect is real!
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Kathrine
11 months ago
A seems spot on, signaling stable growth is key!
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Shawnna
11 months ago
This question seems pretty straightforward. I think the primary objective of an internal audit engagement supervisor is to uphold the quality of the internal audit actively.
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Keva
11 months ago
I've got a good feeling about this one. Based on the prompt, I think the answer is likely going to be option A, "Training and support for planning." That seems to be the most technical and comprehensive approach to the overall bot implementation.
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Sylvia
11 months ago
Okay, the SPI is less than 1, so the project is behind schedule. But the CPI is greater than 1, so the project is under budget. I'll go with schedule as the area needing corrective action.
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