F3 Exam Dumps : Financial Strategy

 A. The shareholder can choose whether to take the cash or not.

With a repurchase, shareholders can decide to sell (take cash) or keep their shares. A one-off dividend forces all shareholders to receive cash.

 C. It means that the company will be able to pay lower total dividends in the future.

After a buyback there are fewer shares in issue. If the company keeps the same dividend per share, the total dividend outlay falls – good for future cash flow and flexibility.

 E. It will not create an expectation for future increased dividends.

A large one-off dividend may be interpreted as a permanent increase, creating pressure to maintain higher payouts. A buyback is seen as a more one-off, discretionary event, so it avoids that expectation.

 B is wrong: a repurchase reduces, not increases, shares in issue.

 D is not an advantage relative to a dividend – both methods return cash that shareholders can spend as they wish.

A – “X may be able to sell the receipts forward.”

If X invoices in customers’ currencies, it will receive known foreign-currency amounts and can hedge the exchange risk using forward contracts. So this is correct.

D – “The overseas customers may have difficulty obtaining X's home currency … so the proposal may increase sales.”

Right now, customers must obtain X’s currency to pay, bearing FX costs and risk. If X invoices in their local currency, buying becomes easier and could boost sales. So D is correct.

Why the others are wrong:

B: Effective sales price might go up or down; it isn’t necessarily lower.

C: Invoicing in customers’ currency removes certainty for X in home-currency terms unless hedged.

E: That describes the current position (customers bear the risk), not the proposed change.

 Revenues are in E$ and F$, costs are in G$, and reporting currency is D$.

 If the D$ strengthens against G$ (option C), then G$ costs translate into fewer D$, so reported costs fall and operating profit margin improves.

 A stronger D$ against E$ or F$ (A or B) reduces the D$ value of sales, hurting margins.

 A weaker D$ against G$ (D) makes G$-denominated costs more expensive in D$, also hurting margins.

So the change that most helps maintain/improve margin is C.