Subject: ADVANCED FINANCIAL MANAGEMENT

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 20 Marks

FR – May 2018 – L2 – Q4 – Consolidated Financial Statements (IFRS 10)

Assess the financial performance and position of two companies using specified ratios and explain the limitations of ratio analysis.

Ibadan Nigeria Limited is considering acquiring a suitable private limited liability company. The board of directors engaged a financial consultant to analyze the financial position of two companies, Abuja Limited and Rivers Limited, which are both receptive to the acquisition. The draft financial statements of the two companies are as follows:

Statements of Profit or Loss

a. Draft a report to the chairman of the board of directors of Ibadan Limited to assess the financial performance and position of the two companies using the following specific ratios: (12 Marks) i. Profitability ratios: Gross profit percentage and net profit margin. ii. Liquidity ratios: Acid test ratio, current ratio, trade receivable period. iii. Long-term financial stability ratios: Gearing ratio and proprietary ratio. iv. Efficiency ratios: Total asset turnover and non-current asset turnover.

b. Explain the limitations of ratio analysis and further information that may be useful to the board of directors when making the acquisition decision. (8 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2018 – L2 – Q4 – Consolidated Financial Statements (IFRS 10)"

  • 5 Marks

AFM – Nov 2016 – L3 – Q5b – Emerging issues in finance and financial management

Compare the functions of the IMF and World Bank and outline challenges faced by the IMF in West Africa.

The International Monetary Fund (IMF) and the World Bank are institutions in the United Nations system. They are twin intergovernmental pillars supporting the structure of the world’s economic and financial order.

Required:
i) Compare and contrast THREE functions of the International Monetary Fund (IMF) and the World Bank. (3 marks)
ii) Explain TWO challenges being faced by the IMF in attaining its objectives in West African Countries. (2 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2016 – L3 – Q5b – Emerging issues in finance and financial management"

  • 15 Marks

AFM – Nov 2016 – L3 – Q5a – Hedging against financial risk: Non-derivative techniques

Demonstrate how YSL can hedge currency risk using futures contracts and calculate the result of the hedge.

YSL is a company located in the USA that has a contract to purchase goods from Japan in two months’ time on 1st September. The payment is to be made in yen and will total 140 million yen. The managing director of YSL wishes to protect the contract against adverse movements in foreign exchange rates and is considering the use of currency futures. The following data are available:

  • Spot foreign exchange rate: $1 = 128.15 yen
  • Yen currency futures contracts on SIMEX (Singapore Monetary Exchange)
    • Contract size: 12,500,000 yen
    • Contract prices (US$ per yen):
      • September: 0.007985
      • December: 0.008250

Assume that futures contracts mature at the end of the month.

Required:
i) Illustrate how YSL might hedge its foreign exchange risk using currency futures. (5 marks)
ii) Explain the meaning of basis risk and show what basis risk is involved in the proposed hedge. (5 marks)
iii) Assuming the spot exchange rate is 120 yen/$1 on 1 September and that basis risk decreases steadily in a linear manner, calculate what the result of the hedge is expected to be. Briefly discuss why this result might not occur. (5 marks)
(Margin requirements and taxation may be ignored.)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2016 – L3 – Q5a – Hedging against financial risk: Non-derivative techniques"

  • 6 Marks

AFM – Nov 2016 – L3 – Q4b – Financial strategy formulation

Discuss three advantages and three disadvantages of ABC Ltd being acquired in a leveraged buyout (LBO).

ABC Ltd is a listed company that operates in the Information Technology industry. The company has been experiencing losses for several years now, and its reserves are fast depleting. Its earnings per share have been negative for the past three years. A team of the company’s largest shareholders and some managers are considering acquiring the company in a leveraged buy-out (LBO).

Required:
Discuss THREE advantages and THREE disadvantages of ABC Ltd being acquired in an LBO.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2016 – L3 – Q4b – Financial strategy formulation"

  • 14 Marks

AFM – Nov 2016 – L3 – Q4a – Valuation of acquisitions and mergers

Calculate the NPV of Mama Ltd's acquisition of Papa Ltd and determine the value of the combined entity and an appropriate share exchange ratio.

a) The Directors of Mama Ltd (Mama), a large listed company, are considering an opportunity to
acquire all the shares of Papa Ltd (Papa), a small listed company with a highly efficient
production technology.
Mama has 10 million shares of common stock in issue that are currently trading at GH¢6.00
each. Papa Ltd has 5 million shares of common stock in issue, each of which is trading at
GH¢4.50.
If Papa is acquired and integrated into the business of Mama, the production efficiency of the
combined entity would increase and save the combined business GH¢600,000 in operating
costs each year to perpetuity.
Though Mama operates in the same industry as Papa, its financial leverage is higher than that
of Papa. Mama’s total debt stock is valued at GH¢40 million, and its after-tax cost of debt is
22%. The beta of Mama’s common stock is 1.2. The return on the risk-free asset is 20% and
the market risk premium is 5%.
Required:
Suppose Mama offers a cash consideration of GH¢25 million from its existing funds to the
shareholders of Papa for all of their shares.
i) Calculate the NPV of the acquisition, and advise the directors of Mama on whether to
proceed with the acquisition or not. (8 marks)
ii) Calculate the value of the combined entity immediately after the acquisition. (3 marks)
iii) Suppose Mama would like to acquire all the shares in Papa by offering fresh shares of its
own common stock to the shareholders of Papa. Advise the directors on the appropriate
share exchange ratio based on market price.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2016 – L3 – Q4a – Valuation of acquisitions and mergers"

  • 10 Marks

AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques

Explanation of internal and external factors influencing transfer pricing decisions for multinational companies like Kofas Ltd.

One of the key considerations for multinational companies is to decide on the price at which goods and services are transferred from one member of a group to another.

Kofas Ltd has been operating in four countries: Ghana, Nigeria, UK, and USA. The parent company and the subsidiaries have decided to use a transfer pricing policy.

Required:
You have been approached as a consultant to advise on the internal and external factors that will facilitate the transfer of goods and services from one member of the group to another. (10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – May 2017 – L3 – Q5b – Treasury and Advanced Risk Management Techniques"

  • 10 Marks

AFM – May 2017 – L3 – Q5a – Hedging against financial risk: Non-derivative techniques

Calculation of settlement value, loan amount, interest on loan, and effective interest rate under a Forward Rate Agreement.

The Board of Directors of Aduana Enterprise has approved an expansion project which will require a cash inflow of GH¢10 million. The investment duration will be 6 months, and management is considering taking a fixed interest rate loan from its bankers. The loan will be required in three months from the date of board’s approval.

Management of Aduana is considering hedging its risk exposure using a Forward Rate Agreement (FRA). The 3-9 months’ FRA rate at the transaction date was 5%.

Required:
If the spot rate at the settlement date is 8%, calculate the following:
i) Settlement value (3 marks)
ii) Loan amount required (2 marks)
iii) Interest on the loan (2 marks)
iv) Effective interest rate (3 marks)

 

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – May 2017 – L3 – Q5a – Hedging against financial risk: Non-derivative techniques"

  • 10 Marks

AFM – May 2017 – L3 – Q4b – Financial reconstruction, Business reorganisation

Distinguishing between leveraged buy-out and recapitalization, identifying types of reconstruction, and describing steps in financial reconstruction.

There are many possible reasons why management would wish to restructure a company’s finances. A reconstruction scheme might be agreed upon when a company is in danger of being put into liquidation.

Required:
i) Distinguish between a leveraged buy-out and leveraged recapitalisation. (4 marks)
ii) What are the THREE main types of reconstruction? Describe them briefly. (3 marks)
iii) Describe the procedures that should be followed when designing a financial reconstruction scheme. (3 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – May 2017 – L3 – Q4b – Financial reconstruction, Business reorganisation"

  • 10 Marks

AFM – May 2017 – L3 – Q4a – Sources of finance and cost of capital

Explanation of Eurobonds, their advantages, and problems associated with their use in Ghana's international borrowing.

The government of Ghana has been borrowing in the international financial market by issuing “Eurobonds” to finance projects in Ghana. There has been a keen debate on the borrowing by the government.

Required:
i) As a Finance Officer, explain what Eurobond is all about. (3 marks)
ii) Identify THREE advantages that have been cited for the government using Eurobonds. (3 marks)
iii) Evaluate FOUR problems associated with the use of international borrowing, especially Eurobonds in Ghana. (4 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – May 2017 – L3 – Q4a – Sources of finance and cost of capital"

  • 4 Marks

AFM – May 2017 – L3 – Q3c – Valuation of acquisitions and mergers

Factors to be considered by the directors and shareholders in evaluating the worthiness of the takeover proposal.

Discuss briefly any other factors that the directors and shareholders of both companies might consider in assessing the worthwhileness of the proposed takeover. (4 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – May 2017 – L3 – Q3c – Valuation of acquisitions and mergers"

  • 10 Marks

AFM – Nov 2018 – L3 – Q5a – The role of the treasury function in multinationals

Determine whether GCB should borrow locally or through a portfolio of foreign currencies based on borrowing rates and expected currency changes.

The Ghana Cocoa Board (GCB) is contemplating borrowing one-year funds in anticipation of the coming cocoa season, which starts in September/October 2017. GCB can borrow from the local financial market in Ghana or borrow a portfolio of funds made up of UK pounds and Euros. The information below is the borrowing rates and the probabilities of expected strengthening of the international currencies vis-à-vis the cedi.

Required:
Determine whether GCB should borrow from the local financial market or borrow a portfolio of funds made up of UK pounds and Euros.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2018 – L3 – Q5a – The role of the treasury function in multinationals"

  • 20 Marks

AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk

Assess the advantages and disadvantages of interest rate swaps and recommend a hedging strategy. Also, explain internal factors for transfer pricing.

JB Investments Holding Ltd (JB) is a multinational company that is committed to a policy of expansion into African countries. JB finances foreign projects with loans obtained in the currency in which project cash flows are received. JB financed an operation in Liberia with a syndicated loan of $20 million. Currently, the loan has three years to maturity. The loan requires semiannual interest payments at a fixed rate of 6.5% per annum, but JB prefers a floating interest rate as the pattern of cash flows from the Liberian project has changed.

The Finance Director talked to the creditors about JB’s preference for a floating interest rate. The creditors have agreed to accept a floating rate of LIBOR plus 200 basis points over the remaining three years of the loan term. However, the Finance Director feels that this rate is rather too high considering JB’s credit rating. She is therefore considering two alternatives for managing the interest rate risk exposure.

Alternative 1: Coupon swap with a bank
Engage in a coupon swap with UT Bank through which JB trades-in its fixed rate interest payments obligation for floating rate interest payments. The table below presents UT Bank’s bid and ask quotes for fixed dollar coupon rates:

Loan term to maturity Bid Ask Treasury note (TN) rate
2 years 2-year TN rate + 30 basis points 2-year TN rate + 40 basis points 5.3%
3 years 3-year TN rate + 35 basis points 3-year TN rate + 50 basis points 5.9%
4 years 4-year TN rate + 40 basis points 4-year TN rate + 60 basis points 6.7%
5 years 5-year TN rate + 45 basis points 5-year TN rate + 70 basis points 7.8%

Floating rate quotation: Floating rates are pegged at 6-month dollar LIBOR plus 100 basis points.

Alternative 2: Coupon swap with another multinational company
Engage in a coupon swap with McEwen Ltd, a multinational company that has a floating rate dollar debt but prefers fixed coupon payments. The interest rate on McEwen’s dollar debt is LIBOR plus 150 basis points but it can borrow fixed rate dollars at 8%. Assume JB can borrow floating rate dollars at LIBOR plus 200 basis points.

Required:
(a)
i) Discuss TWO (2) advantages and TWO (2) disadvantages of hedging interest rate risk with an interest rate swap. (4 marks)
ii) Based on the restructuring deal with the creditors and the two interest rate swap alternatives, recommend a hedging strategy for interest payments on the $20 million debt. Support your recommendation with relevant computations. (10 marks)

(b) The Board of Directors of JB Investments Holdings Ltd is considering a transfer pricing policy for the transfer of goods and services among the company and its foreign subsidiaries.
Required:
Explain THREE (3) internal factors (motivations) for transfer pricing, which the board should consider in formulating a transfer pricing policy for the company. (6 marks)
(Total = 20 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2015 – L3 – Q4 – The use of financial derivatives to hedge against interest rate risk"

  • 3 Marks

AFM – Nov 2017 – L3 – Q1d – Hedging against financial risk: Non-derivative techniques

Recommendations on how to minimize the loss on foreign currency transactions for a multinational company involved in export trade.

In the last couple of years, the Cedi has depreciated substantially against the US Dollar. It is also noticed that the Cedi has had volatile movements against the Pounds Sterling since the beginning of year 2017.

Required: As a Finance Director of your organization, a multinational company which is involved in the export trade, recommend THREE actions to be taken to minimize the loss on foreign currency transactions.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2017 – L3 – Q1d – Hedging against financial risk: Non-derivative techniques"

  • 2 Marks

AFM – Nov 2017 – L3 – Q1c – Treasury and Advanced Risk Management Techniques

Calculating the portfolio risk (beta coefficient) for a combined investment in government securities and the stock market.

Your Uncle has won lotteries and has decided to invest the funds in various securities. His financial advisor advised him to invest 40% of the proceeds into Government Securities (Treasury Bills) and the balance invested in the Stock Market, with funds spread equally among the securities listed on the market.

Required: Advise your Uncle’s Portfolio risk (beta coefficient).

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2017 – L3 – Q1c – Treasury and Advanced Risk Management Techniques"

  • 6 Marks

AFM – Nov 2017 – L3 – Q1b – Sources of finance and cost of capital

Analyzing financing alternatives for working capital of GH¢100,000 through bank loan, promissory notes, and cash discount.

Abbot Ltd needs to increase its working capital by GH¢100,000. It has decided that there are essentially three alternatives of financing available. They are:

i) Borrow from a bank at 8%. This alternative would necessitate maintaining a 25% compensation balance.

ii) Issue promissory notes at 7.5%. The cost of placing the issue would be GH¢500 each six months.

iii) Forego cash discount, granted on the basis of 3/10, net 30.

The firm prefers the flexibility of bank financing, and has provided an additional cost of this flexibility to be 1%.

Required: Assess which alternative financing method should be selected.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2017 – L3 – Q1b – Sources of finance and cost of capital"

  • 20 Marks

AFM – Nov 2018 – L3 – Q4 – Financial reconstruction

Explain the concept of EVA, calculate EVA and NOPAT for 2016 and 2017, and distinguish between spin-offs and sell-offs.

Jabesh Company limited income statements for the years 2016 and 2017 are provided below:

The company directors at a meeting argued that the use of Economic Value Added as a measure of corporate performance is more relevant to current developments in financial markets and agreed to employ it in assessing its performance for years 2017 and 2016.

Additional information is as follows:

  1. The allowance for doubtful debts was GH¢300,000 at 1 January 2016, GH¢250,000 at 31 December 2016, and GH¢350,000 at 31 December 2017.
  2. Research and development costs of GH¢500,000 were incurred during each of the years 2016 and 2017 on Project Z. These costs were expensed in the income statement, as they did not meet the requirements of financial reporting standards for capitalization. Project Z is not complete yet.
  3. At the end of 2015, the company had completed another research and development project, Project X. Total expenditure on this project had been GH¢1,500,000, none of which had been capitalized in the financial statements. The product developed by Project X went on sale on 1 January 2016, and the product was a great success. The product’s lifecycle was only two years, so no further sales of the product are expected after 31 December 2017.
  4. The company incurred non-cash expenses of GH¢15,000 in both years.
  5. Capital employed (equity plus debt) per the statement of financial position was GH¢33,500 at 1 January 2016 and GH¢37,000 at 1 January 2017.
  6. The pre-tax cost of debt was 5% in each year. The estimated cost of equity was 12% in 2016 and 14% in 2017. The rate of corporate tax was 25% during both years.
  7. The company’s capital structure was 60% equity and 40% debt.
  8. There was no provision for deferred tax.

Required:
a) Explain what the directors meant by Economic Value Added (EVA). (2 marks)

b) Calculate the company’s Economic Value Added (EVA) for the years ended 2017 and 2016. (5 marks)

c) Calculate the Net Operating Profit After Tax (NOPAT) for the years ended 2017 and 2016. (6 marks)

d) Explain spin-offs and sell-offs, and identify THREE (3) reasons for spin-offs. (7 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2018 – L3 – Q4 – Financial reconstruction"

  • 9 Marks

AFM – Nov 2017 – L3 – Q1a – Role and Responsibility towards Stakeholders

Explains two reasons why interest rates rise in periods of inflation and discuss the implications of high or fluctuating interest rates on business financing and asset-holding decisions.

Under conditions of inflation, it is common for interest rates to rise possibly at a rate different from those applicable to goods and services.

Required:
i) Explain TWO possible reasons for this phenomenon.

(3 marks)

ii)

Discuss the implications of high or fluctuating interest rates for:

  • Business financing; and (3 marks)
  • Assets-holding decisions. (3 marks)

(Give examples of the types of actions that a company might take)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2017 – L3 – Q1a – Role and Responsibility towards Stakeholders"

  • 12 Marks

AFM – Nov 2018 – L3 – Q3b -Valuation and use of free cash flows

Estimate the value of the firm and its equity using the FCFF and FCFE valuation approaches and calculate the value per share.

DoGood Ltd is evaluating Phinex Ltd using the Free Cash Flow to the Firm (FCFF) and Free Cash Flow to Equity (FCFE) valuation approaches.

DoGood Ltd has gathered the following information (in current Ghana Cedis terms):

  • Phinex Ltd has net income of GH¢250 million, depreciation of GH¢90 million, capital expenditures of GH¢170 million, and an increase in working capital of GH¢40 million.
  • Phinex Ltd will finance 40% of the increase in net fixed assets (capital expenditures less depreciation) and 40% of the increase in working capital with debt financing.
  • Interest expenses are GH¢150 million. The current market value of Phinex’s outstanding debt is GH¢1,800 million.
  • FCFF is expected to grow at 6.0% indefinitely, and FCFE is expected to grow at 7.0%.
  • The tax rate is 30%.
  • Phinex Ltd is financed with 40% debt and 60% equity. The before-tax cost of debt is 9% and the before-tax cost of equity is 13%.
  • Phinex Ltd has 10 million outstanding shares.

Required:
i) Using the FCFF valuation approach, estimate the total value of the firm, the total market value of equity, and the value per share.
(6 marks)

ii) Using the FCFE valuation approach, estimate the total market value of equity and the value per share.
(6 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2018 – L3 – Q3b -Valuation and use of free cash flows"

  • 20 Marks

AFM – Nov 2015 – L3 – Q3 – Sources of Finance and Cost of Capital

Estimate the cost of debt using the Kaplan Urwitz model and assess default probability and expected loss for subordinated bonds.

Lolonyo Foam Ltd (Lolonyo), an Accra-based unlisted company, has been manufacturing mattresses and other foam products since 1990. The company is considering a new project which requires a GHS75 million investment in capital expenditure and net working capital. The directors of Lolonyo have decided to raise the needed funds through a new issue of 10-year subordinated bonds to investors in Ghana. Lolonyo uses a discount rate of 20% to appraise new projects. However, the directors feel that this rate will not be appropriate for this project as its financing method is different from what has been used in the past.

The following information is available for the company:
Total assets: GHS150m
Long-term debt: GHS80m
Net income: GHS10.2m
Net income before interest and taxes: GHS14.8m
Interest payments: GHS1.2m
Tax rate: 25%

Earnings of the company for the past five years are as follows:

Year Earnings (GHS’m)
2014 9.8
2013 9.2
2012 8.5
2011 8.1
2010 8.4

Directors intend to use the Kaplan Urwitz model for unlisted companies to assess the cost of debt. The Kaplan Urwitz model for unlisted companies is given by:

Y=4.41+0.001(Size)+6.40(Profitability)−2.56(Debt)−2.72(Leverage)+0.006(Interest)−0.53(COV)

Where:

  • Y is the credit score
  • Size is measured by total assets
  • Profitability is measured by the ratio of net income to total assets
  • Debt refers to the status of the debt stock; subordinated debt is assigned score 1, and unsubordinated debt is assigned score 0
  • Leverage is measured by the ratio of long-term debt to total assets
  • Interest refers to interest cover, which is measured by net operating income (i.e. net income before interest and tax)
  • COV is the coefficient of variation in earnings, which measures volatility in earnings

The table below presents credit score ranges and corresponding rating categories and yields to maturity for 10-year corporate bonds:

Score (Y) Rating Category Yield to Maturity
Y > 6.76 AAA 22.0%
Y > 5.19 AA 22.5%
Y > 3.28 A 23.2%
Y > 1.57 BBB 24.2%
Y > 0 BB 25.5%

Required:
(a) Estimate the cost of debt. (8 marks)

(b) Suppose Lolonyo applies to a credit rating agency for rating of its debt. Explain any THREE (3) of the criteria the credit rating agency would use in establishing the company’s credit rating. For each criterion, suggest one factor that can be used to assess it. (6 marks)

(c) Suppose the fair market value of assets is GHS200 million and the face value of the 10-year bonds is GHS80 million. The risk-free rate is 18% and the volatility of asset value is 50%.

(i) Find the value of the default probability using the Black-Scholes option pricing model. (3 marks)

(ii) Estimate the expected loss on the bonds if the recovery rate is 60%. (3 marks)
(Total = 20 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2015 – L3 – Q3 – Sources of Finance and Cost of Capital"

  • 8 Marks

AFM – Nov 2018 – L3 – Q3a – Acquisitions and mergers versus other growth strategies

Discuss when takeovers make financial and economic sense and reasons why takeovers may fail to increase shareholder wealth.

Despite substantial evidence, drawn from different countries and different time periods, that suggests the wealth of shareholders in a bidding company is unlikely to be increased as a result of taking over another company, takeovers remain an important part of the business landscape.

Required:
i) Explain briefly when a takeover will make economic and financial sense.
(3 marks)

ii) Discuss briefly FIVE (5) reasons why a takeover may fail to deliver an expected increase in wealth for the bidding company’s shareholders.
(5 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AFM – Nov 2018 – L3 – Q3a – Acquisitions and mergers versus other growth strategies"

knowsia

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Community

Contact Info

  • +233203701923
    +233543919232
  • info@knowsia.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan

Pick a Form

Professional Tutor Application Form
Academic Tutor Application Form
Student Tutor Application Form