CIMA Exam CIMAPRA19-F03-1 Topic 3 Question 36 Discussion

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

Question #: 36
Topic #: 3

The Board of Directors of a small listed company engaged in exploration are currently considering the future dividend policy of the company. Exploration is considered a high-risk business and consequently the company has a low level of debt finance.

Forecasts indicate a period of profit fluctuation in the next few years as the company is planning to embark on a major capital investment project. Debt finance is unlikely to be available due to the project's high business risk.

Which THREE of the following are practical considerations when determining the company's dividend/retention policy?

AThe timing and size of the cash flow requirements for the new investment.

BThe fluctuating nature of the projected future profits.

CThe legislation and regulation governing distributable profits.

DThe dividend policies of mature listed multinational companies in the exploration industry.

EThe general level of interest rates and the tax savings on interest costs relating to debt finance.

Show Suggested Answer

Suggested Answer: A, B, C

Discursive_F0

by Brittni at May 05, 2022, 10:32 PM

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