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GeneralComments q- Qxbg[>e
The structure of the paperwas similar to past papers with two compulsory questions in section A,consistingof 60 marks in total,and three 20-mark questions in section B,of whichcandidates had to do two,for the remaining 40 marks. [ +Y{%U
The overall performance ofthe candidates was satisfactory. zW8*E E+,
In section A,question one consisted of 35marks and question two consisted of 25 marks.Four professional marks wereallocated to question one.Both questions required candidates to undertakecomputations and discussion.In section B,question five was whollydiscursive,while questions three and four consisted of a mixture ofcomputational and discursive elements. ?J,AB #+
Excellent answers wereobtained from candidates who applied their knowledge to the scenario given inthe question.The presentation of such answers was good,with clear labelling andstructure and workings.In question one especially,a clear structure andeffective use of appendices enabled such answers to gain the maximumprofessional marks.In section B,perhaps more than other questions,question fourrequired a well structured and systematic approach as well.Most successfulcandidates attempted all the parts of the questions and managed their time wellbetween questions. eVl'\aUd
There was more evidence inthis sitting compared to previous sittings of some candidates not employing goodtime management techniques and not answering all the parts of a question,or in aminority of cases not answering a question at all.A number of such candidatesfailed marginally even though the questions they had answered fully were of apass standard.It is important to make a reasonable attempt at eachquestion. dr<<! q /
Candidates need to bear inmind that it is easier to obtain marks at the start of a question rather thantowards the end of a question.It is imperative that candidates learn to managetheir time effectively through practicing past exam questions under timed andexamination style conditions. WGAXIQ
Some candidates were poorlyprepared for the exam in terms of their knowledge.This was especially evident inquestions one and three,and in the discursive parts of questions two andfour.Candidates need to be aware that for P4 it is expected that they developtheir knowledge and the ability to apply that knowledachieve a pass mark due tolack of knowledge and not being able to apply thge.In a number of casescandidates failed to at knowledge to the scenario in thequestion. T,_(?Y JW
The P4 paper has a largesyllabus and numerous technical areas.Candidates need to know the syllabus wellin order to apply it to the question scenario.Poor performance was also evidentwhere candidates did not read the content and requirements of questionsfully.Answers need to be directed at the scenario in the question,generalanswers did not gain many marks. &Sp -w?kM
SpecificComments 4c+$%pq5
Question One UgN28YrW
This question requiredcandidates to assess three proposals for a company facing financial difficultiesand discussing the impact of the proposals on the main stakeholders,Part (i)asked candidates to estimate the return the debt holders and the shareholderswould receive if the company ceased trading and closed down,Part (ii) askedcandidates to estimate the income position and the value of the company in theevent of a financial restructure,Part (iii) asked candidates to estimate theadditional finance required and the value of the company in the event of amanagement buy-out,Part (iv) asked the candidates to discuss the impact of eachof these proposals on the company’s main stakeholder groups,Corporaterestructuring and reorganisation from which the key elements of this questionwere drawn is a key area of the syllabus. x^ *1gv $o
Parts (i) and (iv) weregenerally done well,with many candidates achieving high marks for both parts,Inthe discussion part (iv) a number of marks were available for discussion of theimpact on the stakeholders where it was not necessary to have access to theanswers from parts (ii) and (iii),and many answers handled this part well,Inpart (i),most candidates looked at the funds available to the debt holders afterredundancy payments,However,a surprising number of candidates ranked the debtholders and shareholders at the same level for any residual repayments,which isnot correct. 1w"8~Z:UXV
Parts (ii) and (iii) weredone less well,In part (ii) many candidates did assess the income position butcould not then translate that into cash flows and determine an estimate of thevalue,In part (iii) there was confusion about how to calculate the additionalfinance needed and the value of the company,and many answers could not determinethe likely size of the reduced operation,A sizable minority of candidates didnot attempt parts (ii) or (iii) or both at all. #*>E*#?t
QuestionThree NS C/@._
This question was a popularquestion but performance varied between good and quitepoor. dC1V-x10ju
In part (a) this questionrequired candidates to calculate the number of put options needed to hedge anunderlying position,by calculating the hedge ratio using N(-d1).Part (a) alsoasked candidates to explain the numerical answer.Part (a) was either done wellwith candidates calculating the delta and then applying it correctly;or it wasdone poorly where candidates went onto calculating the value of a call and a putoption for the given variables,and these were not required.Very few candidatesexplained the numerical answer.Candidates need to be aware that some questionparts may have more than a single requirement and all the requirements need tobe addressed correctly in order to achieve full marks. c={Ft* N
Part (b) asked candidates todiscuss the position held by each manager with respect to risk and theimplications of this.Some reasonable points were made but in many cases theselacked depth or substance.An article appeared in the Student Accountantrecently,which looked at why risk should or should not bemanaged. !JBae2Z
QuestionFour 4
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In part (a) this questionasked candidates to calculate the dividend capacity of a company which receiveddividends from its international subsidiaries.A proposal was put forward whichwould change the level of dividends received due to a change in the tax payable(in fact the dividends reduced because more profits were being made by thesubsidiary in a high tax country and the higher taxes resulted in lowerdividends).Part (b) asked for a comment on the result and the actions thecompany would need to take if the dividend capacity was not sufficient to paythe desired amount of dividends. /1`cRyS
This question was the leastpopular of the optional,section (b) questions.It required a logical andsystematic approach because a lot was being asked from the candidates especiallyin answering part (a) of the question. |7@O( $ b
Good attempts at part (a) achievedhigh marks but sometimes the answers were not appropriately structured and thisresulted in mixed-up or jumbled answers.Few appropriate answers were receivedfor part (b) and mostly these reflected the disorganised approach to part(a). |p00j|k
QuestionFive `O6:t\d@
This question was the most popular and probably the best answeredof all the questions on the paper with many candidates gaining a high proportionof the marks for their answers.It asked candidates to consider whether or not ajoint venture was the viable option,how the drawbacks of a joint venture couldbe mitigated and additional information required. =?X$Yaw*
Answers that gained fewermarks did not give many points or lacked adequate discussion because they werein note form.Sometimes points were repeated in various formats and these did notget additional marks.Overall though,many answers gained over half marks and somecases over 70% of the total marks for this question.
