[2026] F3 Exam Dumps, Test Engine Practice Test Questions
Pass F3 exam [May 29, 2026] Updated 435 Questions
The CIMA F3 exam covers a range of topics, including financial analysis, risk management, investment strategies, and financing options. It also focuses on the impact of external factors, such as economic conditions and regulatory changes, on financial decision-making.
CIMAPRA19-F03-1 (F3 Financial Strategy) certification exam is a highly respected qualification in the finance industry that demonstrates a candidate's expertise in financial strategy. It is administered by the Chartered Institute of Management Accountants (CIMA) and covers a range of topics related to financial strategy. Candidates must meet certain eligibility requirements to take the exam, and it is administered at Pearson VUE test centers around the world.
NEW QUESTION # 131
A company aims to increase profit before interest and tax (PBIT) each year.
The company reports in A$ but has significant export sales priced in B$.
All other transactions are priced in A$.
In 20X1, the company reported:
In 20X2, the only changes expected are:
* An increase in export prices of 10%, but no change to units sold.
* A rise in the value of the B$ to A$/B$ 2.500 (that is, A$ 1 = B$ 2.5) Is it likely that the company would still meet its objective to grow PBIT between 20X1 and 20X2?
- A. No, PBIT would fall by A$ 48 million.
- B. Yes, PBIT would increase by A$ 48 million.
- C. No, PBIT would fall by A$ 150 million.
- D. Yes, PBIT would increase by A$ 150 million.
Answer: A
NEW QUESTION # 132
Company J is in negotiations to acquire Company K and believes it can turn around Company K's performance to match its own.
The following information is available for the two companies:
Select the maximum price for each share that Company J should place on Company K during negotiations.
- A. $1.7
- B. $3.0
- C. $3.2
- D. $2.0
Answer: B
NEW QUESTION # 133
Which of the following statements about IFRS 7 Financial Instruments: Disclosures is true?
- A. IFRS 7 requires sensitivity analysis in relation to credit risk.
- B. IFRS 7 only applies to entities that are designated as financial institutions by a regulatory authority.
- C. IFRS 7 requires disclosures to be given for each separate class of financial instruments.
- D. The main requirement of IFRS 7 is for qualitative disclosures relating to financial instruments and market risks.
Answer: C
NEW QUESTION # 134
Hospital X provides free healthcare to all members of the community, funded by the central Government.
Hospital Y provides healthcare which has to be paid for by the individual patients. It is a listed company, owned by a large number of shareholders.
In comparing the above two organisations and their objectives, which THREE of the following statements are correct?
- A. The performance of X will be appraised primarily on the basis of value for money.
- B. Only Y is likely to have a mixture of financial and non-financial objectives.
- C. X and Y will have the same primary non financial objective - provision of quality of health care.
- D. X is a not-for-profit organisation while Y is a for-profit organisation.
- E. X and Y have the same primary financial objective - to maximise shareholder wealth.
Answer: C
NEW QUESTION # 135
An unlisted company has the following data:
A listed company in the same industry has a P/E of 11.
The value of the unlisted company based on the P/E of this listed company is:
Give your answer to the nearest whole number.
- A. 0
- B. 1
Answer: A
NEW QUESTION # 136
An entity prepares financial statements to 31 December each year. The following data applies:
1 December 20X0
* The entity purchased some inventory for $400,000.
* In order to protect the inventory against adverse changes in fair value the entity entered into a futures contract to sell the inventory for a fixed price on 31 January 20X1.
* The entity designated this contract as a fair value hedge of the value of the inventory.
31 December 20X0
* The inventory had a fair value of $480,000 and the futures contract had a fair value of $75,000 (a financial liability).
What will be the impact on the statement of profit or loss and other comprehensive income for the year ended
31 December 20X0 in respect of the change in the value of the inventory and the futures contract?
- A. A net gain of $5,000 will be recognised in other comprehensive income.
- B. A loss of $75,000 will be recognised in profit or loss.
- C. A loss of $75,000 will be recognised in other comprehensive income.
- D. A net gain of $5,000 will be recognised in profit or loss.
Answer: D
Explanation:
This is a fair value hedge of inventory.
Under fair value hedge accounting, both:
the change in fair value of the hedged item (inventory), and
the change in fair value of the hedging instrument (futures)
go to profit or loss.
Inventory: fair value rises from $400,000 to $480,000 # gain $80,000.
Futures: fair value becomes a $75,000 liability # loss $75,000.
Net effect in P&L: $80,000 - $75,000 = $5,000 gain.
Nothing goes to OCI for a fair value hedge.
NEW QUESTION # 137
Company A, a listed company, plans to acquire Company T, which is also listed.
Additional information is:
* Company A has 150 million shares in issue, with market price currently at $7.00 per share.
* Company T has 120 million shares in issue,. with market price currently at $6.00 each share.
* Synergies valued at $50 million are expected to arise from the acquisition.
* The terms of the offer will be 2 shares in A for 3 shares in T.
Assuming the offer is accepted and the synergies are realised, what should the post-acquisition price of each of Company A's shares be?
Give your answer to two decimal places.
Answer:
Explanation:
8.24
NEW QUESTION # 138
Company B is an all equity financed company with a cost of equity of 10%.
It is considering issuing bonds in order to achieve a gearing level of 20% debt and 80% equity.
These bonds will pay a coupon rate of 5% and have an interest yield of 6%.
Company B pays corporate tax at the rate of 25%.
According to Modigliani and Miller's theory of capital structure with tax, what will be Company B's new cost of equity?
- A.
- B.
- C.
- D.
Answer: C
NEW QUESTION # 139
Company XXY operates in country X with the X$ as its currency. It is looking to acquire company ZZY which operates in country Z with the Z$ as its currency.
The assistant accountant at Company XXY has started to prepare an initial valuation of Company ZZY's equity for the first 3 years, however their valuation is incomplete. TBC' in the table below indicates that her calculations have yet to be completed.
The following information is relevant:
What is the correct figure (to the nearest million S) to include in year 3 as the present value in X$ million?
- A. X$453 million
- B. X$504 million
- C. X$360 million
- D. X$401 million
Answer: C
NEW QUESTION # 140
KKL is a listed sports clothing company with three separate business units. KKL is seeking to sell TT', one of these business units
TTP cwns a new. brand of trail running shoes that have Droved hugely popular with lone distance runners. The management team of TTP are frustrated by the constraints imposes b/ KKL in managing tie brand and developing. the bus ness and they believe that TTF has huge growth potential.
The management team of TTP have approached KKL with a proposal to purchase 1~P through a management layout (MDO). KKL has accepted this proposal as TTP has not proved to be a good fit' with the rest of the business and has agreed on the selling price.
Which THREE of the following factors a-e mast Likely to affect the success of the MBO?
- A. The ability the TTP management team to develop the brand and achieve the expected growth.
- B. Searing sufficient. funding for the MBO.
- C. The constraints imposed by KKL managing TTF's brand.
- D. The ability of the TTF management team to take over the head office functions successfully.
- E. The motivation of the TTP management team to invest in future growth.
Answer: A,B,D
NEW QUESTION # 141
H Company has a fixed rate load at 10.0%, but wishes to swap to variable. It can borrow at LIBOR 8%.
The bank is currently quoting swap rates of 3.1% (bid) and 3.5% (ask).
What net rate will HHH Company pay if it enters into the swap?
- A. Risk-free rate +8%
- B. Risk-free rate +6.9%
- C. Risk-free rate +6.5%
- D. Risk-free rate +3.1%
Answer: B
NEW QUESTION # 142
Company C has received an unwelcome takeover bid from Company P.
Company P is approximately twice the size of Company C based on market capitalisation.
Although the two companies have some common business interests, the main aim of the bid is diversification for Company P.
The offer from Company P is a share exchange of 2 shares in Company P for 3 shares in Company C.
There is a cash alternative of $5.50 for each Company C share.
Company C has substantial cash balances which the directors were planning to use to fund an acquisition.
These plans have not been announced to the market.
The following share price information is relevant. All prices are in $.
Which of the following would be the most appropriate action by Company C's directors following receipt of this hostile bid?
- A. Pay a one-off special dividend.
- B. Refer the bid to the country's competition authorities.
- C. Write to shareholders explaining fully why the company's share price is under valued.
- D. Change the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.
Answer: C
NEW QUESTION # 143
A company wishes to raise new finance using a rights issue. The following data applies:
* There are 10 million shares in issue with a market value of $4 each
* The terms of the rights will be 1 new share for 4 existing shares held
* After the rights issue, the theoretical ex-rights price (TERP) will be $3.80 Assuming all shareholders take up their rights, how much new finance will be raised ?
Give your answer to one decimal place.
Answer:
Explanation:
$ ? million
7.5, 7.50
NEW QUESTION # 144
A listed company in a high technology industry has decided to value its intellectual capital using the Calculated Intangible Value method (CIV).
Relevant data for the company:
* Pays corporate income tax at 30%
* Cost of equity is 9%, pre-tax cost of debt is 7% and the WACC is 8%
* The value spread has been calculated as $26 million
Calculate the CIV for the company.
- A. 289 million
- B. 531 million
- C. 325 million
- D. 228 million
Answer: D
Explanation:
Under the Calculated Intangible Value (CIV) method, the idea is that intangibles (intellectual capital) explain the firm's ability to earn excess returns over what would be expected from its tangible assets alone.
The value spread of $26m represents pre-tax excess earnings. CIV capitalises the after-tax excess earnings at the firm's WACC:
Adjust value spread for tax (30%):
After-tax value spread=26×(1#0.30)=26×0.70=18.2 m\text{After-tax value spread} = 26 \times (1 - 0.30) = 26
\times 0.70 = 18.2\text{ m}After-tax value spread=26×(1#0.30)=26×0.70=18.2 m Capitalise using WACC (8%):
CIV=18.20.08=227.5 m#228 m\text{CIV} = \frac{18.2}{0.08} = 227.5 \text{ m} \approx 228\text{ m} CIV=0.0818.2=227.5 m#228 m So the calculated intangible value (intellectual capital) of the company is $228 million, which matches Option
A).
NEW QUESTION # 145
A company has 8% convertible bonds in issue. The bonds are convertible in 3 years time at a ratio of 20 ordinary shares per $100 nominal value bond.
Each share:
* has a current market value of $5.60
* is expected to grow at 5% each year
What is the expected conversion value of each $100 nominal value bond in 3 years' time?
- A. $100.0
- B. $129.6
- C. $112.0
- D. $117.6
Answer: B
NEW QUESTION # 146
Company A is located in Country A, where the currency is the A$.
It is listed on the local stock market which was set up 10 years ago.
It plans a takeover of Company B, which is located in Country B where the currency is the B$, and where the stock market has been operating for over 100 years.
Company A is considering how to finance the acquisition, and how the shareholders of Company B might respond to a share exchange or cash (paid in B$).
Which of the following is likely to explain why the shareholders of Company B would prefer a share exchange as opposed to a cash offer?
- A. It would enable them to benefit from the future performance of the combined entity.
- B. They would receive shares in a market that is likely to be more efficient.
- C. It would allow them to realise their investment and make a capital gain.
- D. It would avoid them being exposed to foreign currency risk.
Answer: A
Explanation:
Reasoning:
A share exchange allows Company B's shareholders to stay invested and participate in the future gains (synergies, growth) of the combined business.
A is wrong: cash offers are what "realise" an investment and crystallise a capital gain.
B is wrong: a share exchange introduces foreign currency exposure (to A$), whereas a cash offer in B$ does not.
C is wrong: Company B is in the older, more established market, so it is more likely that market is efficient, not Company A's.
So D is the correct explanation.
NEW QUESTION # 147
Select the category of risk for each of the descriptions below:
Answer:
Explanation:
NEW QUESTION # 148
Select the most appropriate divided for each of the following statements:
Answer:
Explanation:
NEW QUESTION # 149
Company A plans to acquire Company B, an unlisted company which has been in business for 3 years.
It has incurred losses in its first 3 years but is expected to become highly profitable in the near future.
No listed companies in the country operate the same business field as Company B, a unique new high-risk business process.
The future success of the process and hence the future growth rate in earnings and dividends is difficult to determine.
Company A is assessing the validity of using the dividend growth method to value Company B.
Which THREE of the following are weaknesses of using the dividend growth model to value an unlisted company such as Company HHG?
- A. The company has been unprofitable to date and hence, there is no established dividend payment pattern.
- B. The future growth rate in earnings and dividends will be difficult to accurately determine.
- C. The dividend growth model does not take the time value of money into consideration.
- D. The future projected dividend stream is used as the basis for the valuation.
- E. The cost of capital will be difficult to estimate.
Answer: A,B,E
Explanation:
CIMA F3 explains that the Dividend Growth Model (DGM) is only suitable where dividends are stable, predictable, and capable of being forecast with reasonable confidence. It is therefore weak when applied to young, unlisted, high-risk companies, especially those with uncertain future cash flows.
A). No established dividend payment pattern - # Correct
Company B has made losses in its first three years and has not paid dividends. CIMA F3 explicitly states that the dividend growth model is unsuitable where there is no dividend history, because the model relies on extrapolating future dividends from past patterns.
B). Uses future projected dividends - # Incorrect
This is not a weakness, but a fundamental feature of the dividend growth model. All valuation models are forward-looking, and CIMA F3 does not consider this a limitation.
C). Growth rate difficult to determine - # Correct
The business operates in a unique, high-risk sector, and future earnings and dividends are highly uncertain.
CIMA F3 highlights that the DGM is extremely sensitive to the assumed growth rate, making it unreliable when growth cannot be estimated with confidence.
D). Time value of money ignored - # Incorrect
The dividend growth model explicitly discounts future dividends, meaning it fully incorporates the time value of money, a core principle taught in F3.
E). Cost of capital difficult to estimate - # Correct
As an unlisted company, Company B has no observable beta or market data. CIMA F3 stresses that estimating the cost of equity for private, high-risk businesses is problematic, reducing the reliability of DGM outputs.
NEW QUESTION # 150
A venture capitalist invests in a company by means of buying:
* 9 million shares for $2 a share and
* 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time.
The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.
The company has 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
Give your answer to the nearest $ million.
$ million.
Answer:
Explanation:
34, 35, 34000000, 35000000
NEW QUESTION # 151
A private company was formed five years ago and is currently owned and managed by its five founders. The founders, who each own the same number of shares have generally co-operated effectively but there have also been a number of areas where they have disagreed The company has grown significantly over this period by re-investing its earnings into new investments which have produced excellent returns The founders are now considering an Initial Public Offering by listing 70% of the shares on the local stock exchange Which THREE of the following statements about the advantages of a listing are valid?
- A. Increases the profile and reputation of the business.
- B. Helps access to wider sources of finance.
- C. Provides an exit route for the founders
- D. Increases dividend payouts
- E. Reduces agency conflict
Answer: A,B,C
NEW QUESTION # 152
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CIMA CIMAPRA19-F03-1 (F3 Financial Strategy) Exam is a certification exam that is designed to test candidates' understanding of the principles of financial strategy. F3 exam is part of the CIMA professional qualification program and is considered an essential component of the CIMA syllabus. F3 exam is globally recognized and is taken by finance professionals who want to enhance their knowledge and skills in financial strategy.
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