CIMAPRA19-F03-1 Exam - Topic 1 Question 94 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 94
Topic #: 1

Company ACC. an ungeared car manufacturer has launched a takeover bid of Company BDD. a key competitor operating in the same industry Company BDD has high gearing Company ACC has a large surplus cash balance and believes that the acquisition is an opportunity to enhance shareholder wealth through the realisation of synergistic benefits. Which THREE of the following would most likely be synergistic benefits to Company ACC of purchasing Company BDD9 I

AReduction in staff costs due to the removal of duplicated roles.

BDecreased cost of debt

CEnhanced profit due to reduced competition

DReduction in financial risk due to diversification

ECost savings in production due to economies of scale

Show Suggested Answer

Suggested Answer: A, B, E

by Brandon at Aug 26, 2024, 11:19 AM

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Lelia

4 months ago

Diversification could really lower financial risk for ACC!

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Coleen

5 months ago

Really? Economies of scale might not be that easy to achieve.

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Jamal

5 months ago

Definitely see enhanced profit from less competition!

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Clement

5 months ago

Decreased cost of debt? Not sure that's a given.

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Kenia

5 months ago

A reduction in staff costs makes total sense!

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Irving

6 months ago

I think E is definitely a possibility too. Economies of scale could really help ACC lower production costs after the acquisition.

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Leanora

6 months ago

C makes sense to me; if ACC buys BDD, they could reduce competition and potentially increase their market share.

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Dick

6 months ago

I'm not entirely sure about B. Decreased cost of debt could be a benefit, but it doesn't feel like a direct synergy from the acquisition.

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Catrice

6 months ago

I remember we discussed how reducing duplicated roles can lead to significant cost savings, so A seems like a strong choice.

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Aja

6 months ago

The key is to focus on how the acquisition could create value for Company ACC beyond just the financial aspects. Things like reduced competition and diversification risk are important to consider.

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Helaine

6 months ago

I'm a bit confused by the concept of synergistic benefits. Can someone explain that to me in simpler terms? I want to make sure I understand it before selecting my answers.

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Nguyet

6 months ago

Hmm, I'm a bit unsure about this one. I'll need to carefully consider each option and how they relate to the given information about the companies.

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Lawrence

6 months ago

This question seems straightforward, I think I can identify the three most likely synergistic benefits for Company ACC.

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Verona

6 months ago

Okay, let's see. Reduction in staff costs, decreased cost of debt, and cost savings in production - those seem like the most logical choices here.

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Catherin

6 months ago

Hmm, I'm a bit unsure about this one. I know there are a few different high availability options for vCenter, but I'll have to think through the specifics of each one to determine the best fit for this scenario.

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Lindsey

6 months ago

I'm not totally confident, but I think I'll go with option D, Disaster Recovery. That seems to fit the description of a standard physical safeguard.

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Janae

2 years ago

I believe option D is important too, as it can help in reducing financial risk through diversification.

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Bulah

2 years ago

I agree with Erick, option E also makes sense as it can lead to cost savings.

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Cammy

2 years ago

Economies of scale, baby! Now that's what I call a real synergy. Can't wait to see the production costs go down. Maybe they'll even hire a few court jesters to entertain the workers, you know, for morale.

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Frederic

2 years ago

Wait, so they're going to save money on debt by acquiring a highly geared company? That's like trying to get out of debt by taking on more debt. Hmm, I'm not convinced.

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Arleen

2 years ago

B) Decreased cost of debt

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Cassie

2 years ago

A) Reduction in staff costs due to the removal of duplicated roles.

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Rashad

2 years ago

Diversification is always a good thing, right? Reducing financial risk sounds like a solid synergistic benefit to me.

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Natalie

2 years ago

Enhanced profit due to reduced competition is a bit concerning. I hope they don't plan on creating a monopoly or engaging in anti-competitive practices.

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Janae

2 years ago

D) Reduction in financial risk due to diversification.

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Mirta

2 years ago

A) Reduction in staff costs due to the removal of duplicated roles.

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Lisha

2 years ago

I agree, we need to make sure they don't abuse their power.

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Thora

2 years ago

Reduction in staff costs and cost savings in production seem like obvious synergies. But I'm not sure about decreased cost of debt - how does that work exactly?

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