E3 by CIMA Valid Free Exam Practice Test

Question 1

Information regarding two potential investments, that do not provide initial, valuable positive NPV opportunities, is outlined below:
* Y is a telecoms company, considering paying a premium for a Chinese telecoms company which has exclusive rights to service a large segment of the Chinese market, currently worth $123 billion in total The exclusive rights cover 25% of the market
* Z is a developed market retailer, considering paying a premium for an Indian retail company in the belief that the market is going to continue to be lucrative and grow by 8% per annum for the foreseeable future The current market is worth $600 billion and the company currently has 12% of the total market.
Which of the following statements regarding sustainable excess returns for the above real options is true1?

A. Z has the potential to generate greater excess returns as a follow on option than Y. B. Y is an example of an option to abandon and not a follow on option C. Z is an example of an option to abandon and not a follow on option. D. Y has the potential to generate greater excess returns as a follow on option than Z

Correct Answer: A

Question 2

Directors have a duty to shareholders and other stakeholders and are required to promote the success of the company.
Which THREE of the following are valid roles and responsibilities of directors? (Choose three.)

A. To be responsible for keeping all external stakeholders satisfied. B. To consider the likely consequences of any decision in the long term. C. To have regard for the interests of the company's employees. D. To avoid conflicts of interest and of duties. E. To focus only on maximizing company profits.

Correct Answer: B,C,D

Question 3

McKinsey's 7-S' model illustrates the complexity of factors that can influence organisational change Which TWO of the following statements are incorrect?
To make progress in one'S' you need to achieve success in the other 'Ss'

A. The model features 3 'soft' factors, all of which are quantifiable B. 'Shared Values' are sometimes also described as 'Superordinate Goals' C. The model intentionally has no starting point. D. All 7-S' factors vary in importance.

Correct Answer: B,C

Question 4

Company CCC is an automotive component manufacturer. It manufactures three main products within its portfolio:
Product 1: Relative market share of 0.1; Market growth rate of -2%
Product 2: Relative market share of 4.0; Market growth rate of +3%
Product 3: Relative market share of 0.3; Market growth rate of +15%
Which TWO of the following statements are CORRECT? (Choose two.)

A. Product 1 islikely to be at the mature stage of its life cycle, have strong profitability and further investment should be considered. B. Product 3 is likely to be at the growth stage of its life cycle, at high risk of failure and further investment should be considered. C. Product 1 is likely to be at the mature stage of its life cycle, operating in a contracting market and is fairly cash neutral. D. Product 2 is likely to be at the mature stage of its life cycle, is likely to benefit from significant economies of scale. E. Product 2 is likely to be at the growth stage of its life cycle, have weak profitability, poor cash generation and high capital requirements.

Correct Answer: B,E

Question 5

McKinsey saw culture as seven interconnected elements and described these in the '7S' model. Which of the following is NOT a 'hard' factor within the '7S' model?

A. The way in which the Organization plans to gain a competitive advantage. B. The core values of the Organization. C. The way the Organization is structured and who reports to who. D. The daily activities and procedures followed by staff.

Correct Answer: B

Question 6

S is a hybrid car manufacturer. S relies on strong social media presence and online marketing campaigns to drive customers to its website. S prioritises measuring and improving active usage metrics.
Which of the following metrics does S prioritise?
Select ALL that apply.

A. Number of repeat webpage users B. Abandon rates C. The customer feedback score D. The number of customer photographs uploaded E. Number of registered users

Correct Answer: A,B

Question 7

Which THREE of the following statements apply to Lynch's performance pyramid? (Choose three.)

A. The business operating systems level includes the market-related Critical Success Factors. B. The performance pyramid is designed to ensure that all activities support the organization's vision. C. The lowest level of the pyramid contains the day-to-day operational measures. D. The business unit level includes measures which relate to internal systems needed to meet customers' needs. E. The left-hand side of the pyramid contains measures which have an external focus. F. The right-hand side of the pyramid contains measures which are predominantly non-financial.

Correct Answer: A,D,E

Question 8

Information Systems (IS) strategy is correctly defined as:

A. Identifying the information needs of the organization and aligning development to them. B. Decisions on the hardware, software and communications solutions used in the organization. C. The planning, organizing, investment and control of information applications in the organization. D. The roles and structure of information specialists in the organization and their relationship with users.

Correct Answer: A

Question 9

Johnson. Scholes and Whittington define strategy as the direction and scope of an organisation over the long term'. Which THREE of the following are advantages of deliberate long-term planning1?

A. By undertaking detailed analysis management can identify key risks. B. The organisation will comply with external reporting standards C. The organisation's mission, objectives and targets are made explicit which will improve goal congruence. D. Long-term planning will enable equal importance to be given to the different perspectives of the organisation's Balanced Scorecard. E. Management will have to generate ideas using their experience and ability to innovate. F. The organisation has a competitive advantage over others in its industry that do not use long-term planning.

Correct Answer: C,E,F

Question 10

BCA is a long established international airline. Which of the following represent Threats to BCA's business?
(Choose all that apply.)

A. A substantial rise in the price of oil. B. A shortage of trained pilots in BCA. C. Greater popularity of long-haul holidays. D. A higher level of private car ownership. E. A sudden increase in international terrorism.

Correct Answer: A,B

Question 11

QQQ has identified a new strategy which is both Suitable and Feasible However, it will not be Acceptable to some groups of QQQ's stakeholders who have publicly objected to it.
Which THREE of the following statements are correct ways of resolving competing stakeholder objectives, as suggested by Cyert and March?

A. Negotiate with the key stakeholders to achieve an acceptable compromise. B. Conduct research into the causes of the stakeholders' objectives. C. Offer to fully address one group of stakeholders' objections now with a promise to meet the other groups' objections in the future D. Exercise the Board of Directors' power and implement the strategy despite the objections. E. Publish more information about the new strategy including its profit potential. F. Threaten to close down the business unless the objectors withdraw their opposition

Correct Answer: A,C,D

CIMA E3 Strategic Management - E3 Exam Practice Test