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CIMAPRA19-F03-1 Exam - Topic 3 Question 46 Discussion

Company H is considering thevaluation of an unlistedcompany which it hopes to acquire.It has obtained thetarget company's financial statements.Company Hhas been advised that the book value of net assets asshown inthe financial statementsof the target companydoes not provide a reliable indicator of their truevalue.Advise the Board of Directors which of the following THREE statements aredisadvantagesof the net asset basis of valuation?
A) The net book value of assetsis merely a record of past transactions which complies with accounting conventions. and C) Intangible assets are often notshown in the company's financial statements. and D) The net realisable value is usually differentfrom the net book value shown in the financial statements.
B) The net book value of assets can be obtained from the financial statements.
E) The net book value of current assets is normally a reliable indicator of their realisable value.

CIMAPRA19-F03-1 Exam - Topic 3 Question 46 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 46
Topic #: 3
[All CIMAPRA19-F03-1 Questions]

Company H is considering thevaluation of an unlistedcompany which it hopes to acquire.

It has obtained thetarget company's financial statements.

Company Hhas been advised that the book value of net assets asshown inthe financial statementsof the target companydoes not provide a reliable indicator of their truevalue.

Advise the Board of Directors which of the following THREE statements aredisadvantagesof the net asset basis of valuation?

Show Suggested Answer Hide Answer
Suggested Answer: A, C, D

by Serina at May 08, 2022, 09:55 AM

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Lyda
8 months ago
B is just stating a fact, not really a disadvantage though.
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Michell
9 months ago
Wait, E seems off, how can current assets always be reliable?
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Myong
9 months ago
D is spot on, net realizable value can vary a lot!
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Glendora
9 months ago
Totally agree, C is a big issue with intangible assets missing.
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Sheron
9 months ago
A is definitely a disadvantage, just reflects old transactions.
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Allene
9 months ago
I'm a little confused by the wording of the question. What exactly do they mean by "case deflection solution"? I want to make sure I understand the goal before I choose an answer.
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Hortencia
10 months ago
Hmm, I'm not too familiar with PowerShell commands for event logs. I'll need to think through this step-by-step to figure out the right answer.
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Edelmira
10 months ago
Wasn't there a practice question about pricing strategies where penetration pricing was described as a low initial price? That could be option C as well.
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