Question Tag: Stock Exchange

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FM – Nov 2016 – L3 – Q6 – Strategic Performance Measurement

Evaluate Osamco Limited's financial performance and discuss reasons for its potential stock exchange listing.

Question

Osamco Limited, a manufacturer of wire and cables, was bought from its conglomerate parent company in a management buyout deal in August 2010. Six years later, the managers are considering the possibility of listing the company’s shares on the Nigerian Stock Exchange.

The following financial information is made available:

OSAMCO LIMITED
Income Statement for the Year Ended June 30, 2016

Item	Amount (N’million)
Turnover	91.25
Cost of sales	(79.00)
Profit before interest and taxation	12.25
Interest	(3.25)
Profit before taxation	9.00
Taxation	(1.25)
Profit attributable to ordinary shareholders	7.75
Dividend	(0.75)
Retained profit	7.00

Statement of Financial Position as at June 30, 2016

Average performance ratios for the industry sector in which Osamco Limited operates are as stated below:

Industry Sector Ratios

Ratio	Industry Average
Return before interest and tax on long-term capital employed	24%
Return after tax on equity	16%
Operating profit as a percentage of sales	11%
Current ratio	1.6:1
Quick (acid test) ratio	1.0:1
Total debt: equity (gearing)	24%
Dividend cover	4.0
Interest cover	4.5

Required:

(a) Evaluate the financial state and performance of Osamco Limited by comparing it with that of its industry sector. (10 Marks)
(b) Discuss four probable reasons why the management of Osamco Limited is considering Stock Exchange listing. (5 Marks)

Answer

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Tags: Financial Ratios, Gearing, Industry comparison, Profitability, Stock Exchange
Level: Level 3

Topic: Strategic Performance Measurement

FR – Nov 2023 – L2 – Q7a – Regulatory Framework for Financial Reporting

Discusses main sources of financial reporting regulations and reasons for regulatory practices.

Question

Within the context of financial reporting and regulatory frameworks:

i. Discuss the main sources of regulations. (3 Marks)
ii. Discuss TWO reasons why financial reporting practice should be regulated. (2 Marks)

Answer

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Tags: Accounting Standards, Company Law, Financial Reporting, Regulations, Regulatory Rationale, Stock Exchange
Level: Level 2

Topic: Regulatory Framework for Financial Reporting

FM – Nov 2017 – L3 – Q2 – Mergers and Acquisitions

Calculate Raymond Plc.'s valuation, analyze Harold Limited's acquisition value, and assess the offer price from shareholders' perspectives.

Question

Raymond Plc. is a successful IT services company incorporated 10 years ago. It was listed on the Stock Exchange 3 years ago. The company has a broad customer base mainly consisting of small and medium-sized companies. Raymond Plc. has achieved rapid growth in recent years by obtaining regular business from satisfied customers and also by acquiring other IT services companies.

The Directors of Raymond Plc. have identified Harold Limited, an unlisted company, as a possible acquisition target. Harold Limited has a number of large multinational clients, and, in general, its clients tend to be larger than those of Raymond Plc. If successful, the acquisition would go ahead on January 1, 2018.

Forecast financial data for Raymond Plc. and Harold Limited as of December 31, 2017, are summarized below:

Financial Item	Raymond Plc.	Harold Limited
Share capital (Ordinary ₦1 shares)	₦150m	₦40m
Market share price	₦4.90	N/A

N/A: Not applicable (not listed).

Additional information:

If Harold Limited were to remain an independent company, its Directors estimate that reported Profit After Tax would be ₦15 million for 2018 and then grow by 2% yearly in perpetuity;
If the acquisition were to go ahead, Raymond Plc.’s Directors estimate that Harold Limited’s profit after tax would be 5% higher for 2018 than if the company remains an independent company, and that profit after tax would then grow by 3% yearly in perpetuity;
The average ungeared Cost of Equity for the industry is 8%;
Both Raymond Plc. and Harold Limited are wholly equity financed; and
Profit after tax can be assumed to be a good approximation of free cash flow attributable to investors.

The Directors of Raymond Plc. are considering offering to purchase Harold Limited at a price of ₦7.00 per share. It is estimated that transaction costs of ₦8 million would be payable on the acquisition and that ₦2 million would be required in the first year to cover the costs of integrating the two companies.

Required:

(a) Calculate:
- i. The value of Raymond Plc. as at December 31, 2017.
- ii. The value of Harold Limited as at December 31, 2017 before taking the possible acquisition of the company by Raymond Plc. into account.
- iii. The overall increase in value created by the acquisition of Harold Limited by Raymond Plc. (8 Marks)
(b)
- i. Explain how value might be created by the proposed acquisition. (2 Marks)
- ii. Comment on the difficulties which Raymond Plc. is likely to face in realizing the potential added-value, after the acquisition. (2 Marks)
(c) Evaluate the proposed offer price of ₦7.00 per share for Harold Limited from the point of view of:
- i. Harold Limited’s shareholders.
- ii. Raymond Plc.’s shareholders. (8 Marks)

(Total 20 Marks)

Answer

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Tags: Acquisition, Cost of Equity, Free Cash Flow, Integration Costs, IT Services, Shareholder Analysis, Stock Exchange, Synergies, Valuation
Level: Level 3

Topic: Mergers and acquisitions
Series: NOV 2017

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

Question

Which of the following is NOT a function of a stock exchange?

A. Provide a system in which shares can be traded in a regulated manner
B. Enforce rules of business conduct on market participants
C. Ensure availability of shares and bonds to be traded by investors
D. Ensure that there is an efficient system for providing new financial information about companies to investors in the market
E. Provide a system for recording information about the prices at which shares are bought and sold and making them available to participants

Answer

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Tags: Financial Markets, Securities Trading, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

Question

Which of the following is NOT a function of a stock exchange?

Answer

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Tags: Financial Markets, Securities Trading, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – Nov 2014 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets

Discuss the segments of the Nigerian financial market, the advantages of listing on the stock exchange, and the listing requirements for the First-Tier and Alternative Securities Markets.

Question

The financial market is a mechanism by which surplus and deficit units of an economy can be brought together to accelerate the growth and development of the economy.

Required:

a. Explain the primary and secondary segments of the Nigerian financial market. (4 Marks)
b. State and explain FOUR advantages that a company would derive from listing on the stock exchange. (8 Marks)
c. List in a tabular form FOUR listing requirements each for the First-Tier and Alternative Securities Markets. (8 Marks)

(Total 20 Marks)

Answer

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Tags: Alternative Securities Market, First-Tier, Listing Requirements, Primary Market, Secondary Market, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2014

BL – May 2018 – L1 – SA – Q20 – Company Law

Identify the situation where a company cannot acquire its own shares

Question

A company may acquire its own shares in the following circumstances EXCEPT to:
A. Eliminate fractional shares
B. Satisfy the claim of a dissenting shareholder
C. Ensure that the company’s share price does not fall on the stock exchange
D. Comply with a court order
E. Settle or compromise a debt or claim asserted by or against the company

Answer

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Tags: Company Shares, Corporate Law, Stock Exchange
Level: Level 1

Topic: Company Law
Series: MAY 2018

CR – Nov 2017 – L3 – Q3a – Other information in the annual report

Identify and explain three listing requirements for a company on the Ghana Stock Exchange.

Question

A company is said to be listed when its securities are approved to be bought and sold on the Stock Exchange. Newly issued shares cannot trade in the Over-The-Counter (OTC) Market before getting listed on the Ghana Stock Exchange (GSE). You need to communicate this intention to the GSE and work with the Exchange’s listing requirements before the public floatation.

Required:
Identify and explain THREE requirements a company is expected to meet before it gets listed on the Ghana Stock Exchange.

Answer

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Tags: Capital Markets, Equity, Listing Requirements, Stock Exchange
Level: Level 3

Topic: Other information in the annual report
Series: NOV 2017

FM – Nov 2016 – L3 – Q6 – Strategic Performance Measurement

Evaluate Osamco Limited's financial performance and discuss reasons for its potential stock exchange listing.

Question

The following financial information is made available:

OSAMCO LIMITED
Income Statement for the Year Ended June 30, 2016

Item	Amount (N’million)
Turnover	91.25
Cost of sales	(79.00)
Profit before interest and taxation	12.25
Interest	(3.25)
Profit before taxation	9.00
Taxation	(1.25)
Profit attributable to ordinary shareholders	7.75
Dividend	(0.75)
Retained profit	7.00

Statement of Financial Position as at June 30, 2016

Average performance ratios for the industry sector in which Osamco Limited operates are as stated below:

Industry Sector Ratios

Ratio	Industry Average
Return before interest and tax on long-term capital employed	24%
Return after tax on equity	16%
Operating profit as a percentage of sales	11%
Current ratio	1.6:1
Quick (acid test) ratio	1.0:1
Total debt: equity (gearing)	24%
Dividend cover	4.0
Interest cover	4.5

Required:

(a) Evaluate the financial state and performance of Osamco Limited by comparing it with that of its industry sector. (10 Marks)
(b) Discuss four probable reasons why the management of Osamco Limited is considering Stock Exchange listing. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Ratios, Gearing, Industry comparison, Profitability, Stock Exchange
Level: Level 3

Topic: Strategic Performance Measurement

FR – Nov 2023 – L2 – Q7a – Regulatory Framework for Financial Reporting

Discusses main sources of financial reporting regulations and reasons for regulatory practices.

Question

Within the context of financial reporting and regulatory frameworks:

i. Discuss the main sources of regulations. (3 Marks)
ii. Discuss TWO reasons why financial reporting practice should be regulated. (2 Marks)

Answer

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Tags: Accounting Standards, Company Law, Financial Reporting, Regulations, Regulatory Rationale, Stock Exchange
Level: Level 2

Topic: Regulatory Framework for Financial Reporting

FM – Nov 2017 – L3 – Q2 – Mergers and Acquisitions

Calculate Raymond Plc.'s valuation, analyze Harold Limited's acquisition value, and assess the offer price from shareholders' perspectives.

Question

Forecast financial data for Raymond Plc. and Harold Limited as of December 31, 2017, are summarized below:

Financial Item	Raymond Plc.	Harold Limited
Share capital (Ordinary ₦1 shares)	₦150m	₦40m
Market share price	₦4.90	N/A

N/A: Not applicable (not listed).

Additional information:

If Harold Limited were to remain an independent company, its Directors estimate that reported Profit After Tax would be ₦15 million for 2018 and then grow by 2% yearly in perpetuity;
If the acquisition were to go ahead, Raymond Plc.’s Directors estimate that Harold Limited’s profit after tax would be 5% higher for 2018 than if the company remains an independent company, and that profit after tax would then grow by 3% yearly in perpetuity;
The average ungeared Cost of Equity for the industry is 8%;
Both Raymond Plc. and Harold Limited are wholly equity financed; and
Profit after tax can be assumed to be a good approximation of free cash flow attributable to investors.

Required:

(a) Calculate:
- i. The value of Raymond Plc. as at December 31, 2017.
- ii. The value of Harold Limited as at December 31, 2017 before taking the possible acquisition of the company by Raymond Plc. into account.
- iii. The overall increase in value created by the acquisition of Harold Limited by Raymond Plc. (8 Marks)
(b)
- i. Explain how value might be created by the proposed acquisition. (2 Marks)
- ii. Comment on the difficulties which Raymond Plc. is likely to face in realizing the potential added-value, after the acquisition. (2 Marks)
(c) Evaluate the proposed offer price of ₦7.00 per share for Harold Limited from the point of view of:
- i. Harold Limited’s shareholders.
- ii. Raymond Plc.’s shareholders. (8 Marks)

(Total 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acquisition, Cost of Equity, Free Cash Flow, Integration Costs, IT Services, Shareholder Analysis, Stock Exchange, Synergies, Valuation
Level: Level 3

Topic: Mergers and acquisitions
Series: NOV 2017

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

Question

Which of the following is NOT a function of a stock exchange?

Answer

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Tags: Financial Markets, Securities Trading, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

Question

Which of the following is NOT a function of a stock exchange?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Markets, Securities Trading, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – Nov 2014 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets

Discuss the segments of the Nigerian financial market, the advantages of listing on the stock exchange, and the listing requirements for the First-Tier and Alternative Securities Markets.

Question

The financial market is a mechanism by which surplus and deficit units of an economy can be brought together to accelerate the growth and development of the economy.

Required:

(Total 20 Marks)

Answer

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Tags: Alternative Securities Market, First-Tier, Listing Requirements, Primary Market, Secondary Market, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2014

BL – May 2018 – L1 – SA – Q20 – Company Law

Identify the situation where a company cannot acquire its own shares

Question

Answer

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Tags: Company Shares, Corporate Law, Stock Exchange
Level: Level 1

Topic: Company Law
Series: MAY 2018

CR – Nov 2017 – L3 – Q3a – Other information in the annual report

Identify and explain three listing requirements for a company on the Ghana Stock Exchange.

Question

Required:
Identify and explain THREE requirements a company is expected to meet before it gets listed on the Ghana Stock Exchange.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Markets, Equity, Listing Requirements, Stock Exchange
Level: Level 3

Topic: Other information in the annual report
Series: NOV 2017

Question Tag: Stock Exchange

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FM – Nov 2016 – L3 – Q6 – Strategic Performance Measurement

Evaluate Osamco Limited's financial performance and discuss reasons for its potential stock exchange listing.

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FR – Nov 2023 – L2 – Q7a – Regulatory Framework for Financial Reporting

Discusses main sources of financial reporting regulations and reasons for regulatory practices.

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FM – Nov 2017 – L3 – Q2 – Mergers and Acquisitions

Calculate Raymond Plc.'s valuation, analyze Harold Limited's acquisition value, and assess the offer price from shareholders' perspectives.

You're reporting an error for "FM – Nov 2017 – L3 – Q2 – Mergers and Acquisitions"

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

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BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

You're reporting an error for "BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets"

BMF – Nov 2014 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets

Discuss the segments of the Nigerian financial market, the advantages of listing on the stock exchange, and the listing requirements for the First-Tier and Alternative Securities Markets.

You're reporting an error for "BMF – Nov 2014 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets"

BL – May 2018 – L1 – SA – Q20 – Company Law

Identify the situation where a company cannot acquire its own shares

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CR – Nov 2017 – L3 – Q3a – Other information in the annual report

Identify and explain three listing requirements for a company on the Ghana Stock Exchange.

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FM – Nov 2016 – L3 – Q6 – Strategic Performance Measurement

Evaluate Osamco Limited's financial performance and discuss reasons for its potential stock exchange listing.

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FR – Nov 2023 – L2 – Q7a – Regulatory Framework for Financial Reporting

Discusses main sources of financial reporting regulations and reasons for regulatory practices.

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FM – Nov 2017 – L3 – Q2 – Mergers and Acquisitions

Calculate Raymond Plc.'s valuation, analyze Harold Limited's acquisition value, and assess the offer price from shareholders' perspectives.

You're reporting an error for "FM – Nov 2017 – L3 – Q2 – Mergers and Acquisitions"

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

You're reporting an error for "BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets"

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

You're reporting an error for "BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets"

BMF – Nov 2014 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets

Discuss the segments of the Nigerian financial market, the advantages of listing on the stock exchange, and the listing requirements for the First-Tier and Alternative Securities Markets.

You're reporting an error for "BMF – Nov 2014 – L1 – SB – Q3 – Basics of Business Finance and Financial Markets"

BL – May 2018 – L1 – SA – Q20 – Company Law

Identify the situation where a company cannot acquire its own shares

You're reporting an error for "BL – May 2018 – L1 – SA – Q20 – Company Law"

CR – Nov 2017 – L3 – Q3a – Other information in the annual report

Identify and explain three listing requirements for a company on the Ghana Stock Exchange.

You're reporting an error for "CR – Nov 2017 – L3 – Q3a – Other information in the annual report"

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