CIMA Exam CIMAPRA19-F03-1 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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Janae

9 months ago

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

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Bulah

9 months ago

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

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Cammy

10 months 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

10 months 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

9 months ago

B) Decreased cost of debt

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Cassie

9 months ago

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

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Rashad

10 months ago

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

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10 months ago

I think option A is a synergistic benefit because it can help reduce costs.

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