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CIMA Exam CIMAPRA19-F03-1 Topic 2 Question 63 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 63
Topic #: 2
[All CIMAPRA19-F03-1 Questions]

When valuing an unlisted company, aP/Eratio for a similar listed company may be used but adjustments to theP/Eratio may be necessary.

Which THREE of the following factors would justify a reduction in the proxy p/e ratio before use?

Show Suggested Answer Hide Answer
Suggested Answer: A, B, E

by Chantell at Jan 06, 2023, 10:19 PM

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Yoko
15 days ago
This question is like a game of Tetris - you gotta fit the right pieces together to make it work. A, C, and F are the way to go. Although, I can't help but wonder if the exam writers just threw in a few wild cards to see who's really paying attention. Unlisted companies and their 'profit items' - what a wild ride!
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Dalene
16 days ago
A, C, and F are the winners here. Although, I have to say, the idea of an unlisted company being subject to less scrutiny and regulation just sounds like a recipe for disaster. Maybe they should toss in a few goats and a crystal ball to really seal the deal!
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Thersa
20 days ago
This is a tricky one! I'd go with A, C, and F. Gotta watch out for those sneaky answers that seem like they'd increase the P/E ratio, but actually decrease it. Can't fool me, exam writers!
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Dino
16 days ago
I think A makes sense, lack of marketability can definitely lower the P/E ratio.
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Theron
1 months ago
The correct answers are A, C, and F. The lower scrutiny and regulation (B) and the higher growth forecast (E) would actually justify an increase in the proxy P/E ratio, not a reduction.
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Veronica
11 days ago
F) A profit item within the unlisted company's latest earnings which will not reoccur.
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Breana
14 days ago
C) Unlisted companies being generally smaller and less established.
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Hailey
17 days ago
A) The relative lack of marketability of unlisted company shares.
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Thomasena
2 months ago
A, C, and F are the factors that would justify a reduction in the proxy P/E ratio. The lack of marketability and the smaller, less established nature of the unlisted company warrant a lower valuation, and a non-recurring earnings item should also be accounted for.
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Alica
14 days ago
Yes, the lack of marketability, smaller size, and non-recurring earnings all play a role in adjusting the ratio.
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Julianna
17 days ago
I think A, C, and F are the factors that justify a reduction in the proxy P/E ratio.
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Skye
2 months ago
I also think factor E could justify a reduction. Higher forecast earnings growth in the unlisted company should definitely be taken into account.
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Kent
2 months ago
I agree with Vernice. The lack of marketability, smaller size, and non-recurring profit item are all valid reasons for adjustment.
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Vernice
2 months ago
I think factors A, C, and F would justify a reduction in the proxy p/e ratio.
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