ACCA P4考官文章

acca p4知识点ACCA P4是ACCA考试中比较难的一门科目，考核内容涉及到许多复杂的金融和商业问题。

为了成功通过ACCA P4考试，需要具备一定的知识点和技能。

本文将围绕ACCA P4知识点进行分步骤的阐述。

步骤一：了解ACCA P4的考试安排和内容ACCA P4考试分为两个部分：主要题型和附加题型。

主要题型的比重为80%，包括四道大题，每道大题分值为25分。

附加题型的比重为20%，包括六道小题，每道小题分值为5分。

考试时间为三小时。

ACCA P4考试的内容主要涉及到战略性商业问题、财务策略、价值管理、皮克斯理论、对冲和风险管理等方面。

步骤二：了解财务管理相关概念ACCA P4考试的核心是财务管理，因此考生必须对财务管理相关概念有所了解。

需要掌握的概念包括财务报表分析、成本核算、财务规划和预算编制等方面。

步骤三：掌握金融市场相关知识ACCA P4考试也关注金融市场的行情和趋势，考生需要了解经济形势、利率、汇率等方面的知识点。

此外，还需要了解一些金融衍生品的工具，如期货、期权、互换等。

步骤四：掌握战略规划技能ACCA P4考试同样要求考生具有一定的战略思维和规划能力。

考生需要了解企业管理模式、市场定位、战略规划和业务模式等方面的知识点。

同时，也要熟悉SWOT分析、PEST分析和五力模型等分析工具。

步骤五：了解风险管理和对冲工具企业面临的风险需通过对冲工具来管理。

考生需要了解一些风险管理和对冲工具，如金融期货、期权、互换和衍生品等。

同时，还需要了解一些风险管理策略，如VaR和CVaR等。

步骤六：练习题目和做题技巧ACCA P4考试需要考生具有较强的应用能力，因此练习题目非常重要。

可以通过习题集、模拟试题等方式进行练习。

考生还需要掌握做题技巧，如对题目的理解、答案的推导、结论的陈述等方面的技巧。

ACCA P4是一门很有挑战性的科目，要想通过此考试需要考生全面掌握财务管理、金融市场、战略规划和风险管理等方面的知识点。

Question – Allegro Technologies Co (ATC)Allegro Technologies Co (ATC), a listed company based in Europe, has been involved in manufacturing motor vehicle parts for many years. Although not involved in the production of complicated engine components previously, ATC recently purchased the patent rights for $2m to produce an innovative energy saving engine component which would cut carbon-based emissions from motor vehicles substantially.ATC has spent $5m developing prototypes of the component and undertaking investigative research studies. The research studies came to the conclusion that the component will have a significant commercial potential for a period of five years, after which, newer components would come into the market and the sales revenue from this component would fall to virtually nil. The research studies have also found that in the first two years (the development phase) there will be considerable training and development costs and fewer components will be produced and sold. However, sales revenue is expected to grow rapidly in the following three years (the commercial phase).It is estimated that in the first year, the selling price would be $1,000 per component, the variable costs would be $400 per component and the total direct fixed costs would be $1,500,000. Thereafter, while the selling price is expected to increase by 8% per year, the variable and fixed costs are expected to increase by 5% per year, for the next four years. Training and development costs are expected to be 120% of the variable costs in the first year, 40% in the second year and 10% in each of the following three years.The estimated average number of engine components produced and sold per year is given in Table 1.Year 1 2 3 4 5Units produced and sold 7,500 20,000 50,000 60,000 95,000There is considerable uncertainty as to the exact quantity that could be produced and sold and the estimated standard deviation of units produced and sold is expected to be as much as 30%.Machinery costing $120,000,000 will need to be installed prior to commencement of the component production. ATC has enough space in its factory to manufacture the components and therefore will incur no additional rental costs. Tax allowable depreciation is available on the machinery at 10% straight line basis. It can be assumed that, depending on the written down value, a balancing adjustment will be made at the end of the project, when the machinery is expected to be sold for $40,000,000. ATC makes sufficient profits from its other activities to take advantage of any tax loss relief available from this project.Initially, ATC will require additional working capital for the project of 20% of the first year’s sales revenue. Thereafter every $1 increase in sales revenue will require a 10% increase in working capital.Although this would be a major undertaking for ATC, it is confident that it can raise the finance required for the machinery and the first year’s working capital. The financing will be through a mixture of a rights issue and a bank loan, in the same proportion as the market values of its current equity and debt capital. Any annual increase in working capital after the first year will be financed by internally generated funds.Largo Co, a company based in South-East Asia, has approached ATC with a proposal to produce some of the parts required for the component at highly competitive rates. In exchange, Largo Co would expect ATC to sign a five-year contract giving Largo Co the exclusive production rights for the parts.Staccato Innovations Co (SIC) is a listed company involved in the manufacture of innovative engine components and engines for many years. As the worldwide demand for energy saving products has increased, it has successfully developed and sold products designed to reduce carbon emissions. SIC has offered to buy the production rights of the component and the machinery from ATC for $113,000,000 after the development phase has been completed in two-years’ time.Additional dataATC, Extracts from its latest Statement of Financial Position$mNon-current assets 336Current assets less current liabilities 746% Bank loan 156Share capital 52Reserves 202ATC shares have a face value of $0.50 per share and are currently trading at $3.50 per share. ATC’s beta has been quoted at approximately 1.3 over the past year.SIC, Extracts from its latest Statement of Financial Position$mNon-current assets 417Current assets less current liabilities 1575% Loan notes (2016–2018) 92Share capital 125Reserves 357SIC shares have a face value of $1 per share and are currently trading at $3.00 per share. Its loan notes are trading at $102 per $100. SIC’s beta has been quoted at approximately 1.8 over the past year.Other dataTax rate applicable to ATC and SIC 20%It can be assumed that tax is payable in the same year as the profits on which it is charged.Estimated risk-free rate of return 3%Historic equity market risk premium 6%Required:Prepare a report to the Board of Directors of ATC that:(i) Assesses whether ATC should undertake the project of developing and commercialising the innovative enginecomponent before taking SIC’s offer into consideration. Show all relevant calculations. (13 marks) (ii) Assesses the value of the above project if ATC takes SIC’s offer into consideration. Show all relevant calculations(10 marks) (iii) Discusses the approach taken and the assumptions made for parts (i) and (ii) above. (8 marks) (iv) Discusses possible implications of ATC entering into a contractual agreement with Largo Co. Include in the discussion suggestions of how any negative impact may be reduced. (5 marks) Professional marks for format, structure and presentation of the report. (4 marks)(40 marks)AnswerReport to the ATC Board of DirectorsAssessment of the investment in the engine component projectThis report recommends whether or not ATC would benefit by investing in the engine component project by considering the following alternatives open to it, and explains the approach taken in each case and the assumptions made:– The value of the project without the SIC offer to buy the project on completion of the two-year development phase.– The value of the project after taking into account SIC’s offer.The report also considers the possible implications of the offer made by Largo Co on the project.Approach takenThe approach taken is to estimate the net present value (NPV) of the project based on the given estimates of costs and revenues without the SIC offer (see appendices one and three).This is followed by a revised estimate of the value of the project, after taking into consideration SIC’s offer. This is based on viewing the project as a real option to abandon (put option) the project and using Black-Scholes Option Pricing (BSOP) model to give an estimate of this value (see appendix two).Assumptions made and initial assessmentIn calculating the value of the project, the following assumptions have been made:– Since this is a new venture for ATC but an ongoing business for SIC, an estimate of the project’s risk, as measured by the project’s risk-adjusted beta, is made (appendix three, working W4) using SIC’s business risk (SIC’s asset beta) but ATC’s financial risk (project equity beta). This risk-adjusted beta is used to calculate the cost of equity and then the cost of capital (discount rate) for the project (appendix three, working w4).– As part of the W4 calculation in appendix three, it is assumed that debt is riskless and has a beta of zero.– Unless indicated otherwise, it is assumed that all cash flows occur at the end of the year.– The patent purchase cost and the investigative research costs are past costs, and therefore not part of the calculation of the value of the project, which is based on future cash flows.– The option for ATC is the opportunity to ‘sell’ the project to SIC after two years if the cash flows do not appear to be favourable, hence this is a put option to abandon a project. Since the option is exercised after two years, it can be considered to be a ‘European’ type option and the BSOP model can be applied, together with the put-call parity relationship.Based on the calculations in the appendices, from the cost and revenue estimates provided, the net present value before considering the SIC option is negative at $9,359,000 approximately (appendix one). However after taking into account the value of the put option, the net present value is positive at $8,087,000 approximately (appendix two). Therefore, it would be beneficial for ATC to undertake the project, if it can decide whether to continue with the project or sell it to SIC for $133,000,000 after a period of two years. However, without this option it should not proceed with the project.ATC will not actually obtain the value of the option, however the option value takes into account the volatility or uncertainty of the project. In this case, it indicates that the project is worth pursuing because the volatility may result in increases in future cash flows and the project becomes profitable. On the other hand, the project can be abandoned for $113,000,000 in two years if the likelihood of sufficient future cash flows remains doubtful. The value attached to this choice is $17,446,000 approximately (appendix two). In the meantime, ATC can put into place mechanisms to make the production and sales targets more certain and profitable. Therefore, the time ATC has before it needs to make a decision is reflected in the value of the project by considering real options using the BSOP model.The BSOP model makes several assumptions such as perfect markets, constant interest rates and lognormal distribution of asset prices. It also assumes that volatility can be assessed and stays constant throughout the life of the project, and that the underlying asset can be traded. Neither of these assumptions would necessarily apply to real options. Therefore, the Board needs to treat the value obtained as indicative rather than definitive, and take the assumptions and limitations into consideration before making a final decision. Implications of the Largo Co offer on the value of the projectFrom the above discussion, it is evident that the project has a negative net present value if it is not considered in conjunction with an option to abandon. The abandonment option makes the project viable. However, if ATC enters into a five-year contractual agreement with Largo Co then this may make the two-year offer by SIC to buy the project redundant. There is no guarantee that SIC would continue to ask Largo Co to produce the parts and ATC would not be able to honour the contract and keep the SIC’s offer open at the same time. ATC would need to consider the impact of the cost savings from the agreement with Largo Co against the possible loss of the option. The Board may also wish to consider how binding the contract would be legally, and also consider the negative impact to ATC’s reputation and additional costs if it breaches the contract in future.In order to mitigate the impact of the issue, the Board may wish to approach Largo Co to discuss the terms of the contract and the provision of possible exclusion clauses. The Board may also want to investigate the reasons behind Largo Co’s insistence of a five-year contract and offer alternatives such as asking Largo Co to produce components for other ATC products if this venture should cease. Alternatively the Board may initiate discussions with SIC to consider whether it would be willing to honour the contract should the project be sold to them in two years.In summary, the initial recommendation is that, based on the projected revenue and cost estimates, the project should be pursued if it taken together with SIC’s offer to buy the project after two years. However, on its own it is not worthwhile. The offer by Largo Co may make SIC’s offer invalid initially but the Board should consider alternatives, some of which are suggested above.Net present value calculation (ignoring SIC offer)Year 0 1 2 3 4 5 $’000Sales revenue (w1) 7,500 21,600 58,300 75,540 129,200 Less:Variable costs (w2) 3,000 8,400 22,050 27,780 46,170 Fixed costs 1,500 1,575 1,654 1,736 1,823 Training and development 3,600 3,360 2,205 2,778 4,617 Cash flows before tax (600) 8,265 32,391 43,246 75,590 Taxation (w3) 2,520 747 (4,078) (6,249) (8,718) Working capital (1,500) (1,410) (3,670) (1,724) (5,366) 13,670 Machinery (120,000) 40,000 Net cash flows (121,500) 510 5,342 26,589 31,631 120,542 Present values (12%, w4) (121,500) 455 4,259 18,926 20,102 68,399 Net present value is approximately $(9,359,000)Appendix 2Value of put option (incorporating the offer from SIC)Present value of underlying asset (Pa) = $107,427,000 (approximately)(This is the sum of the present values of the cash flows foregone in years 3, 4 and 5)Price offered by Largo Co (Pe) = $113,000,000Risk-free rate of interest (r) = 3%Volatility of underlying asset (s) = 30%Time to expiry of option (t) = 2 yearsd1 = [ln(107,427,000/113,000,000) + (0.03 + 0.5 x 0.32) x 2] / [0.3 x 2½] = 0.234d2 = 0.234 – 0.3x21/2 = -0.190N(d1) = 0.5 + 0.0925 = 0.5925N(d2) = 0.5 – 0.0753 = 0.4247Call value = $107,427,000x0.5925 – $113,000,000x0.4247xe–0.03x2 = approx. $18,454,000Put value = $18,454,000 – $107,427,000 + $113,000,000xe–0.03x2 = approx. $17,446,000Net present value with put option = $17,446,000 – $9,359,000 = approx. $8,087,000Appendix 3Workings to support the net present value calculation (Appendix 1)W1Year 1 2 3 4 5Units produced and sold 7,500 20,000 50,000 60,000 95,000Unit price ($) 1,000 1,080 1,166 1,259 1,360Sales revenue ($’000) 7,500 21,600 58,300 75,540 129,200W2Year 1 2 3 4 5Units produced and sold 7,500 20,000 50,000 60,000 95,000Unit variable costs ($) 400 420 441 463 486Variable costs ($’000) 3,000 8,400 22,050 27,780 46,170W3Year 1 2 3 4 5Cash flows before tax ($’000) (600) 8,265 32,391 43,246 75,590Tax allawable dep’n ($’000) (12,000) (12,000) (12,000) (12,000) (32,000)Tax able flows ($’000) (12,600) (3,735) 20,391 31,246 43,590Taxation (20%) ($’000) (2,520) (747) 4,078 6,249 8,718W4Asset beta of project = 1.8 x (3 x 125)/(3 x 125 + 92 x 1.02 x 0.8) = 1.50Equity beta: project beta adjusted for financial risk of ATC = 1.5 x (3.5 x 104 + 156 x 0.8)/(3.5 x 104) = 2.014Cost of euqity = 3& + 2.014 x 6% = 15.08%WACC (discount rate) = (15.08% x 364 + 6% x 0.8 x 156)/520 = 11.996% approx. 12%.Marking schemeMark(s) Part (i) NPV calculationCalculation of project equity beta 1 Calculation of discount rate as a result 1 Sales revenue 2 Variable costs 2 Fixed overheads 1 Training and development 1 Taxation 2 Working capital required 2 Present values and NPV 1 Total part (i) 13Part (ii) Option CalculationIdentify correct asset value 1 Identify correct time to expiry 1 Identify other variables: exercise price, interest rate and volatility 1 d1 2 N(d1) 1 d2 and N(d2) 1 Call value 1 Put value 1 NPV with option value 1 Total part (ii) 10Part (iii) DiscussionIdentify put option correctly 1 Discussing how real options can help with NPV decisions 2–3 Discussion of the limitations of real options 2–3 Discussion of other assumptions and approach 2–3 Max part (iii) 8Part (iv)Discussing the difficulty with exercising the option if contract agreed 2–3 Reducing negative impact 2–3 Max part (iv) 5Professional marks (neatness and clarity, structure, report format) 4Note: Credit will be given for alternative, valid points which are not in the solution for parts (iii) and (iv)。

ACCA高效备考：P4考前TipsFor September 2016 sitting, the global pass rate of P4 is only about 33% which is quite disappointing. The examiner pointed out that many candidate shave not got full four professional marks awarded in question one. Manyca ndidates can only answer the questions of specific areas from syllabus, sucha s: foreign investment appraisal and business valuation. They are unfamiliar w ith the topics like: interestrates risk hedging, private equity finance. It iscrucia l for the students to learn the wholesyllabus notjust one or two ‘highly exa minable’ areas.Section A: a compulsory‘mixed’ questionIt will be a ‘mixed ‘questioninvolved many requirements from different areas. ➤September 2016 Q1: foreign investment appraisal, real options, risks ofsetting up foreign production facility, private equity finance➤June 2016Q1: purchasing power parity theory, estimation of multinationalcompa ny’ dividend capacity, the relationship between dividend decision andfinancing decision, DVM, foreign currency risk hedgingTherefore,for Dec sitting, the question one will also combine different examinabl e areas from entire syllabus. Actually,it can be anything (why not? If you are wellprepared). Just say in reportpart, if it is about foreign investment appraisal, it will be quite similar tothe Q7,Q8,Q9 in exam kit. Do notforget to assess the results yo u’ve achieved. If the examiner asksyou todiscuss the assumptions used,please do n ot justlist the assumptions. You must discusswhether or not they are reasonable.If it is about acquisition, refinancing and reorganization, it will be quitesimilar to Q16,Q62,Q55 in exam kit,June 2016 Q2,Q3. Different business valuation methods (FCF,FCFE,P/E,DVM,BSOP) will be tested in computational part. Theirindividual pr os and cons will be discussed in the report. Do notforget reversetakeover indeed is not an acquisition but a quick listing strategy. (Pleasereview recent technique article). Also, the three aspects from pattern ofbehavior can be applied in this sec tion to analyze why many acquisitions inreality failed. The maximum premium or net extra benefit generated from anacquisition or extra finance required are the t opics been tested many times.Different acquisition financing strategies (cash offer, share-share, bonds, andconvertibles) and impacts on the share price(s) of acqui ring company or (targetcompany).Risk adjusted WACC is very important! It can be incorporated into investment a ppraisal orbusiness valuation questions. Do not forget how to de-gear proxy’ e quity beta, and re-gear relevant asset beta.BSOP can also be used to value equity. The relevant calculation has been testedb y the old examiner but not the current examiner. It is crucial to list thefive variabl es and be able to discuss the limitations. Delta hedge and fiveGreeks canalso be tested. Please be prepared to calculate hedge ratio. If you are holdingshares, you will not necessarily to sell call options.Also,other topics like: bond valuation, duration or modified duration of bond,Isla mic finance, probability analysis, regulation of takeover, and differentbusiness fa ctors of setting up foreign division can also appear in section A orB.Section B: the topicsmentioned above can also be tested as a 25-marks quest ion.Apartfrom, please be prepared for a full 25 marks hedging question like:Interestrate hedging:· Different hedging strategies: forward, future, option on future, collar,swap, currency swap (indeed is an interest rate swap, just the counter part isin a differe nt country).· This question will not be as difficult as you expect. Please review recentque stions(Q76,Q77,Q78 in exam kit).· You should write down the details, such as:· The number of contracts, the expiry date of future,thefutureprice or exercis e price of option.· The function of interest rate future is to fix the LIBOR(forinstance)at the d ate of closing the transaction ( the start of loan or deposit). The futureprice at close-out date should be estimated through estimating unexpired basisat clos e-out date which is a standard working.That is also where the basis riskcoming fr om.· Option on futures gives buyer right but not obligationto exercise futurecon tracts. Using option is normally an expensive alternative, as premium mustbe pai d regardless of the fact option will be exercised or not. The profit onoption for option buyer is calculated by comparing the future price atclose-out date and the exercise price of option. Please ensure you will getthis right in the exam.· The purpose of using collar is to lower premium payable and to limit theup side benefit (as the possibility of this is low). If the company will borrowmoney, it will buy puts (cap) to set an upper limit of borrowing rate and sellcalls (floor) to set a lower limit of borrowing rate. If the company willdeposit money, it will buy calls (floor) to set a lower limit of depositingrate and to sell puts (cap) to set an u pper limit of depositing rate. When itbuys options, it will pay the premium. When it sells options, it will receive thepremium.· Determining forward rates and its application to interest swap.。

2014年ACCA新大纲考试科目全介绍Advanced Financial Management (P4)科目介绍：P4《高级财务管理》是F9《财务管理》的后续课程，更加注重一些复杂的战略财务管理问题的解决。

大纲分为四大部分，主要考察：1.在跨国企业的环境下，高级行政人员或咨询人员在满足不同利益相关者需求时扮演的角色和责任；2.在本国和国际环境下，投资决策和融资决策对战略结果的影响；3.在复杂的公司结构下，财产管理部门的角色，其中包括企业存在的风险和管理这些风险的战略；4.财务问题的影响。

近几年考试通过率趋势图：知识结构：科目关联性:P4《高级财务管理》考察的是作为一名高级财务人员或咨询人员如何运用相关知识、技巧和专业判断来为企业财务管理提出建议。

与P4直接相关的课程是基础技术模块中F9（财务管理），它完整详细解释了F9课程中部分内容。

因涉及到职业道德、财报分析和公司战略方面的内容，P4也与P1、P2、P3间接相关。

准备知识:F9投资评估（Investment appraisal），公司理财（Business finance），资本成本（Cost of capital），商业评估（Business valuations）和风险管理（Risk management）。

其中，特别需要注意的是公司理财方面的长短期融资，内部融资和利息政策和资本结构方面，和商业评估方面包括股票的估值模型和一些实际运用方面的考量，债务和其他金融资产估值，以及有效市场假说等知识点。

P3财务分析，包括支持和制定公司战略方面的财务决策，做出战略选择和实施行动时遇到的财务问题，以及相应作出的一些应对。

考试形式：P4的考试时长为3小时，分为两个部分，A部分一道题为必选题共50分；B部分共有三道题每题25分，可以任选两题作答。

新旧考纲的主要变化：2014年考纲并无重大更改，还是遵循2013年的考纲。

但是P4的难度会变难一些。

但A5(b) Environmental issues and integrated reporting，考纲做了一些调整，对于这部分的知识点的要求有所提高：Assess and advise on the impact of investment and financing strategies and decisions on the organizations’stakeholders, from an integrated reporting and governance perspective，原来对于这方面的考核只需要评价就可以了，现在增加了从财务人员的角度提建议的环节，对于知识点的考核更加侧重于运用，而不是简单的纸上谈兵。

ACCA P4-P7考纲重点分析
P4 AdvancedFinancialManagement 高级财务管理
以F9 & P1的核心知识为基础，分析更为复杂的企业环境下的投资、融资决策。

现金管理在大型复杂企业结构下的角色以及风险管理等相关内容
P5 AdvancedPerformanceManagement 高级业绩管理
以F5 & P2的核心知识为基础，内容涉及战略计划和控制;经济，财政，环境因素;业绩核算系统和设计;绩效结果评估;管理会计;业绩管理的现代发展等几大方面。

P6 AdvancedTaxation高级税务
深入学习遗产税、个人所得税、企业所得税、利得税、增值税、印花税的核算以及相关各类保险的核算，缴纳。

制定相应的税务计划，合理避税。

P7 AdvancedAudit and Assurance高级审计与认证业务
以F8的核心知识为基础，引入相关法律知识，专业理论知识，多种审计服务的设定以及相关报告。

现代信息系统、技术的发展。

ACCA P4-P7模拟题及解析（1）1Coeden Co is a listed company operating in the hospitality and leisure industry. Coeden Co’s board of directors met recently to discuss a new strategy for the business. The proposal put forward was to sell all the hotel properties that Coeden Co owns and rent them back on a long-term rental agreement. Coeden Co would then focus solely on the provision of hotel services at these properties under its popular brand name. The proposal stated that the funds raised from the sale of the hotel properties would be used to pay off 70% of the outstanding non-current liabilities and the remaining funds would be retained for future investments.The board of directors are of the opinion that reducing the level of debt in Coeden Co will reduce the company’s risk and therefore its cost of capital. If the proposal is undertaken and Coeden Co focuses exclusively on the provision of hotel services, it can be assumed that the current market value of equity will remain unchanged after implementing the proposal.Coeden Co Financial InformationExtract from the most recent Statement of Financial Position$’000Non-current assets (re-valued recently) 42,560Current assets 26,840–––––––Total assets 69,400–––––––Share capital (25c per share par value) 3,250Reserves 21,780Non-current liabilities (5·2% redeemable bonds) 42,000Current liabilities 2,370–––––––Total capital and liabilities 69,400–––––––Coeden Co’s latest free cash flow to equity of $2,600,000 was estimated after taking into account taxation, interest and reinvestment in assets to continue with the current level of business. It can be assumed that the annual reinvestment in assets required to continue with the current level of business is equivalent to the annual amount of depreciation. Over the past few years, Coeden Co has consistently used 40% of its free cash flow to equity on new investments while distributing the remaining 60%. The market value of equity calculated on the basis of the freecash flow to equity model provides a reasonable estimate of the current market value of Coeden Co.The bonds are redeemable at par in three years and pay the coupon on an annual basis. Although the bonds are not traded, it is estimated that Coeden Co’s current debt credit rating is BBB but would improve to A+ if the non-current liabilities are reduced by 70%.Other Information Coeden Co’s current equity beta is 1·1 and it can be assumed that debt beta is 0. The risk free rate is estimated to be 4% and the market risk premium is estimated to be 6%.There is no beta available for companies offering just hotel services, since most companies own their own buildings.The average asset beta for property companies has been estimated at 0·4. It has been estimated that the hotel services business accounts for approximately 60% of the current value of Coeden Co and the property company business accounts for the remaining 40%.Coeden Co’s corporation tax rate is 20%. The three-year borrowing credit spread on A+ rated bonds is 60 basis points and 90 basis points on BBB rated bonds, over the risk free rate of interest. Required:(a) Calculate, and comment on, Coeden Co’s cost of equity and weighted average cost of capital before and after implementing the proposal. Briefly explain any assumptions made. (20 marks) (b) Discuss the validity of the assumption that the market value of equity will remain unchanged after the implementation of the proposal. (5 marks)(c) As an alternative to selling the hotel properties, the board of directors is considering a demerger of the hotel services and a separate property company which would own the hotel properties. The property company would take over 70% of Coeden Co’s long-term debt and pay Coeden Co cash for the balance of the property value.Required:Explain what a demerger is, and the possible benefits and drawbacks of pursuing the demerger option as opposed to selling the hotel properties. (8 marks)(33 marks)2 Lignum Co, a large listed company, manufactures agricultural machines and equipment for different markets around the world. Although its main manufacturing base is in France and it uses the Euro (€) as its base currency, it also has a few subsidiary companies around the world. Lignum Co’s treasury division is considering how to approach the following three cases of foreign exchange exposure that it faces.Case OneLignum Co regularly trades with companies based in Zuhait, a small country in South America whose currency is the Zupesos (ZP). It recently sold machinery for ZP140 million, which it is about to deliver to a company based there. It is expecting full payment for the machinery in four months. Although there are no exchange traded derivative products available for the Zupesos, Medes Bank has offered Lignum Co a choice of two over-the-counter derivative products.The first derivative product is an over-the-counter forward rate determined on the basis of the Zuhait base rate of 8·5% plus 25 basis points and the French base rate of 2·2% less 30 basis points.Alternatively, with the second derivative product Lignum Co can purchase either Euro call or put options from Medes Bank at an exercise price equivalent to the current spot exchange rate of ZP142 per €1. The option premiums offered are: ZP7 per €1 for the call option or ZP5 per €1 for the put option.The premium cost is payable in full at the commencement of the option contract. Lignum Co can borrow money at the base rate plus 150 basis points and invest money at the base rate minus 100 basis points in France.Case TwoNamel Co is Lignum Co’s subsidiary company based in Maram, a small country in Asia, whose currency is the Maram Ringit (MR). The current pegged exchange rate between the Maram Ringit and the Euro is MR35 per €1. Due to economic difficulties in Maram over the last couple of years, it is very likely that the Maram Ringit will devalue by 20% imminently. Namel Co is concerned about the impact of the devaluation on its Statement of Financial Position.Given below is an extract from the current Statement of Financial Position of Namel Co.MR ’000Non-current assets 179,574Current assets 146,622––––––––Total assets 326,196––––––––Share capital and reserves 102,788Non-current liabilities 132,237Current liabilities 91,171––––––––Total capital and liabilities 326,196–––––––– The current assets consist of inventories, receivables and cash. Receivables account for 40% of the current assets.All the receivables relate to sales made to Lignum Co in Euro. About 70% of the current liabilities consist of payables relating to raw material inventory purchased from Lignum Co and payable in Euro. 80% of the non-current liabilities consist of a Euro loan and the balance are borrowings sourced from financial institutions in Maram.Case ThreeLignum Co manufactures a range of farming vehicles in France which it sells within the European Union to countries which use the Euro. Over the previous few years, it has found that its sales revenue from these products has been declining and the sales director is of the opinion that this is entirely due to the strength of the Euro. Lignum Co’s biggest competitor in these products is based in the USA and US$ rate has changed from almost parity with the Euro three years ago, to the current value of US$1·47 for €1. The agreed opinion is that the US$ will probably continue to depreciate against the Euro, but possibly at a slower rate, for the foreseeable future. Required:Prepare a report for Lignum Co’s treasury division that:(i) Briefly explains the type of currency exposure Lignum Co faces for each of the above cases;(3 marks)(ii) Recommends which of the two derivative products Lignum Co should use to manage its exposure in case one and advises on alternative hedging strategies that could be used. Show all relevant calculations; (9 marks)(iii) Computes the gain or loss on Namel Co’s Statement of Financial Position, due to the devaluation of the Maram Ringit in case two, and discusses whether and how this exposure should be managed;(8 marks)(iv) Discusses how the exposure in case three can be managed. (3 marks)Professional marks will be awarded in question 2 for the structure and presentation of the report.(4 marks) (27 marks)Section B – TWO questions ONLY to be attempted3Sigra Co is a listed company producing confectionary products which it sells around the world. It wants to acquire Dentro Co, an unlisted company producing high quality, luxury chocolates. Sigra Co proposes to pay for the acquisition using one of the following three methods:Method 1A cash offer of $5·00 per Dentro Co share; or Method 2An offer of three of its shares for two of Dentro Co’s shares; or Method 3An offer of a 2% coupon bond in exchange for 16 Dentro Co’s shares. The bond will be redeemed in three years at its par value of $100.Extracts from the latest financial statements of both companies are as follows:Sigra Co Dentro Co$’000 $’000Sales revenue 44,210 4,680––––––– ––––––Profit before tax 6,190 780Taxation (1,240) (155)––––––– ––––––Profit after tax 4,950 625Dividends (2,700) (275)––––––– ––––––Retained earnings for the year 2,250 350––––––– ––––––Non-current assets 22,450 3,350Current assets 3,450 247Non-current liabilities 9,700 873Current liabilities 3,600 436Share capital (40c per share) 4,400 500Reserves 8,200 1,788Sigra Co’s current share price is $3·60 per share and it has estimated that Dentro Co’s price to earnings ratio is 12·5% higher than Sigra Co’s current price to earnings ratio. Sigra Co’s non-current liabilities include a 6% bond redeemable in three years at par which is currently trading at $104 per $100 par value.Sigra Co estimates that it could achieve synergy savings of 30% of Dentro Co’s estimated equity value by eliminating duplicated administrative functions, selling excess non-current assets and through reducing the workforce numbers,if the acquisition were successful.Required:(a) Estimate the percentage gain on a Dentro Co share under each of the above three payment methods. Comment on the answers obtained. (16 marks)(b) In relation to the acquisition, the board of directors of Sigra Co are considering the followingtwo proposals:Proposal 1Once Sigra Co has obtained agreement from a significant majority of the shareholders, it will enforce the remaining minority shareholders to sell their shares; andProposal 2Sigra Co will offer an extra 3 cents per share, in addition to the bid price, to 30% of the shareholders of Dentro Co on a first-come, first-serve basis, as an added incentive to make the acquisition proceed more quickly.Required:With reference to the key aspects of the global regulatory framework for mergers and acquisitions, brieflydiscuss the above proposals. (4 marks)(20 marks)4Arbore Co is a large listed company with many autonomous departments operating as investment centres. It sets investment limits for each department based on a three-year cycle. Projects selected by departments would have to fall within the investment limits set for each of the three years. All departments would be required to maintain a capital investment monitoring system, and report on their findings annually to Arbore Co’s board of directors.The Durvo department is considering the following five investment projects with three years of initial investment expenditure, followed by several years of positive cash inflows. The department’s initial investment expenditure limits are $9,000,000, $6,000,000 and $5,000,000 for years one, two and three respectively. None of the projects can be deferred and all projects can be scaled down but not scaled up.Investment required at start of yearProject Year one Year two Year three Project net(Immediately) present valuePDur01 $4,000,000 $1,100,000 $2,400,000 $464,000PDur02 $800,000 $2,800,000 $3,200,000 $244,000PDur03 $3,200,000 $3,562,000 $0 $352,000PDur04 $3,900,000 $0 $200,000 $320,000PDur05 $2,500,000 $1,200,000 $1,400,000 Not providedPDur05 project’s annual operating cash flows commence at the end of year four and last for a period of 15 years.The project generates annual sales of 300,000 units at a selling price of $14 per unit and incurs total annual relevant costs of $3,230,000. Although the costs and units sold of the project can be predicted with a fair degree of certainty,there is considerable uncertainty about the unit selling price. The department uses a required rate of return of 11% for its projects, and inflation can be ignored.The Durvo department’s managing director is of the opinion that all projects which return a positive net present value should be accepted and does not understand the reason(s) why Arbore Co imposes capital rationing on its departments. Furthermore, she is not sure why maintaining a capital investment monitoring system would be beneficial to the company.Required:(a) Calculate the net present value of project PDur05. Calculate and comment on what percentage fall in the selling price would need to occur before the net present value falls to zero. (6 marks) (b) Formulate an appropriate capital rationing model, based on the above investment limits, that maximises the net present value for department Durvo. Finding a solution for the model is not required. (3 marks)(c) Assume the following output is produced when the capital rationing model in part (b) above is solved:Category 1:Total Final Value$1,184,409Category 2:Adjustable Final ValuesProject PDur01: 0·958Project PDur02: 0·407Project PDur03: 0·732Project PDur04: 0·000Project PDur05: 1·000Category 3:Constraints Utilised SlackYear one: $9,000,000 Year one: $0Year two: $6,000,000 Year two: $0Year three: $5,000,000 Year three: $0Required:Explain the figures produced in each of the three output categories. (5 marks)(d) Provide a brief response to the managing director’s opinions by:(i) Explaining why Arbore Co may want to impose capital rationing on its departments; (2 marks) (ii) Explaining the features of a capital investment monitoring system and discussing the benefits ofmaintaining such a system. (4 marks) (20 marks)试题答案：1 (a)Before implementing the proposalCost of equity = 4% + 1·1 x 6% = 10·6%Cost of debt = 4% + 0·9% = 4·9%Market value of debt (MVd):Per $100: $5·2 x 1·049–1 + $5·2 x 1·049–2 + $105·2 x 1·049–3 = $100·82Total value = $42,000,000 x $100·82/$100 = $42,344,400Market value of equity (MVe):As share price is not given, use the free cash flow growth model to estimate this. The question states that the free cash flow to equity model provides a reasonable estimate of the current market value of the company.Assumption 1: Estimate growth rate using the rb model. The assumption here is that free cash flows to equity which are retained will be invested to yield at least at the rate of return required by the company’s shareholders. This is the estimate of how much the free cash flows to equity will grow by each year.r = 10·6% and b = 0·4, therefore g is estimated at 10·6% x 0·4 = 4·24%MVe = 2,600 x 1·0424/(0·106 – 0·0424) approximately = $42,614,000The proportion of MVe to MVd is approximately 50:50Therefore, cost of capital:10·6% x 0·5 + 4·9% x 0·5 x 0·8 = 7·3%After implementing the proposalCoeden Co, asset beta estimate1·1 x 0·5/(0·5 + 0·5 x 0·8) = 0·61Asset beta, hotel services onlyAssumption 2: The question does not provide an asset beta for hotel services only, which is the approximate measure of Coeden Co’s business risk once the properties are sold. Assume that Coeden Co’s asset beta is a weighted average of the property companies’ average beta and hotel services beta.Asset beta of hotel services only:0·61 = Asset beta (hotel services) x 60% + 0·4 x 40%Asset beta (hotel services only) approximately = 0·75Coeden Co, hotel services only, estimate of equity beta:MVe = $42,614,000 (Based on the assumption stated in the question)MVd = Per $100: $5·2 x 1·046–1 + $5·2 x 1·046–2 + $105·2 x 1·046–3 = $101·65Total value = $12,600,000 x $101·65/$100 = $12,807,900 say $12,808,0000·75 = equity beta x 42,614/(42,614 + 12,808 x 0·8)0·75 = equity beta x 0·806Equity beta = 0·93Coeden Co, hotel services only, weighted average cost of capitalCost of equity = 4% + 0·93 x 6% = 9·6%Cost of capital = 9·6% x 0·769 + 4·6% x 0·231 x 0·8 = 8·2%Comment:Before proposal After proposalimplementation implementationCost of equity 10·6% 9·6%WACC 7·3% 8·2%Implementing the proposal would increase the asset beta of Coeden Co because the hotel services industry on its own has a higher business risk than a business which owns its own hotels as well. However, the equity beta and cost of equity both decrease because of the fall in the level of debt and the consequent reduction in the company’s financial risk. The company’s cost of capital increases because the lower debt level reduces the extent to which the weighted average cost of capital can be reduced due to the lower cost of debt. Hence the board of directors is not correct in assuming that the lower level of debt will reduce the company’s cost of capital.(b)It is unlikely that the market value of equity would remain unchanged because of the change in the growth rate of free cash flows and sales revenue, and the change in the risk situation due to the changes in the business and financial risks of the new business.In estimating the asset beta of Coeden Co as offering hotel services only, no account is taken of the changes in business risk due to renting rather than owning the hotels. A revised asset beta may need to be estimated due to changes in the businessrisk.The market value of equity is used to estimate the equity beta and the cost of equity of the business after the implementationof the proposal. But the market value of equity is dependent on the cost of equity, which is, in turn, dependent on the equitybeta. Therefore, neither the cost of equity nor the market value of equity is independent of each other and they both willchange as a result of the change in business strategy.(c) DemergerA demerger would involve the company splitting into two (or more) parts, with each part becoming a separate, independent company. The shareholders would then hold shares in each separate, independent company. Each company would most probably have its own separate management team. On the other hand, selling the hotel properties outright would be termed as a divestment, where a company would sell part of its assets.BenefitsThere are a number of possible benefits in pursuing a demerger option for Coeden Co and its shareholders. The management teams would be able to focus on creating value for each company separately, and create a unique financial structure that is suitable for each company. The full value of each company would become apparent as a result. Coeden Co’s shareholdersmay have invested in the company specifically for its risk profile and selling the properties may imbalance their portfolios.With a demerger, the portfolio diversification remains unchanged. Communication may be stronger between the two management teams with a demerger. Since Coeden Co trades heavily on its brandname, the quality and maintenance of the hotel properties is critical, and good communication links will help ensure that these are safeguarded. However, responsibility for maintenance of the properties will need to be negotiated. Selling a lot of properties all at once may flood the market and lower the value that can be obtained for each hotel property.DrawbacksA number of possible drawbacks for Coeden Co and its shareholders may occur if it pursues the option to demerge. The demerger may be an expensive process to undertake and may result in a decline in the value of the companies overall. The bond holders may not agree to 70% of the long-term loans to be transferred to a property company and may ask for the terms of the loans to bere-negotiated. The new property company would need to raise the extra finance to pay the cash for the remaining property values. Coeden Co may not have the expertise amongst its management staff to manage a property company or to recruit an appropriate management team. Overall, the main drawbacks revolve around the additional costs that would probably need to be incurred if the demerger option is pursued.[Note: Credit will be given for alternative, valid points]2Report to the Treasury Division, Lignum CoDiscussion and recommendations for managing the foreign exchange exposureThe report discusses and makes recommendations on how the treasury division may manage the foreign exchange exposure it faces under three unrelated circumstances or cases.The appendices to the report show the detailed calculations to support the discussion around case one (see appendix I) and around case two (see appendix II).Foreign exchange exposures With case one, Lignum Co faces a possible exposure due to the receipt it is expecting in four months in a foreign currency, and the possibility that the exchange rates may move against it between now and in four months time. This is known as transactions exposure. With case two, the exposure is in the form of translation exposure, where a subsidiary’s assets are being translated from the subsidiary’s local currency into Euro. The local currency is facing an imminent depreciation of 20%. Finally in the third case,the present value of future sales of a locally produced and sold good is being eroded because of overseas products being sold fora relatively cheaper price. The case seems to indicate that because the US$ has depreciated against the Euro, it is possible to sell the goods at the same dollar price but at a lower Euro price. This is known as economic exposure.Hedging strategiesCase oneTransactions exposure, as faced by Lignum Co in situation one, lasts for a short while and is easier to manage by means of derivative products or more conventional means. Here Lignum Co has access to two derivative products: an OTC forward rate and OTC option. Using the forward rate gives a higher return of €963,988, compared to options where the return is €936,715 (see appendix I). However, with the forward rate, Lignum Co is locked into a fixed rate (ZP145·23 per €1) whether the foreign exchangerates move in its favour or against it. With the options, the company has a choice and if the rate moves in its favour, that is if the Zupeso appreciates against the Euro, then the option can be allowed to lapse. Lignum Co needs to decide whether it is happyreceiving €963,988, no matter what happens to the exchange rate over the four months or whetherit is happy to receive at least €936,715 if the ZP weakens against the €, but with a possibility of higher gains if the Zupeso strengthens.21Lignum Co should also explore alternative strategies to derivative hedging. For example, money markets, leading and lagging, and maintaining a Zupeso account may be possibilities. If information on the investment rate in Zupesos could be obtained, then a money market hedge could be considered. Maintaining a Zupeso account may enable Lignum Co to offset any natural hedges and only convert currency periodically to minimise transaction costs.Case twoHedging translation risk may not be necessary if the stock market in which Lignum Co’s shares are traded is efficient. Translation of currency is an accounting entry where subsidiary accounts are incorporated into the group accounts. No physical cash flows in or out of the company. In such cases, spending money to hedge such risk means that the group loses money overall, reducing the cash flows attributable to shareholders. However, translation losses may be viewed negatively by the equity holders and may impact some analytical trends and ratios negatively. In these circumstances, Lignum Co may decide to hedge the risk.The most efficient way to hedge translation exposure is to match the assets and liabilities. In Namel Co’s case the assets are more exposed to the Maram Ringit compared to the liabilities, hence the weakening of the Maram Ringit from MR35 per €1 to MR42 per €1 would make the assets lose more (accounting) value than the liabilities by €1,018,000 (see appendix II). If the exposure for the assets and liabilities were matched more closely, for example by converting non-current liabilities from loans in Euro to loans in MR, translation exposure would be reduced.Case threeEconomic exposure, which is not part of transactions exposure, is long-term in nature and therefore more difficult to manage. There are for example, few derivatives which are offered over a long period, with the possible exception of swaps. A further issue is that economic exposure may cause a substantial negative impact to a company’s cash flows and value over the long period of time. In this situation, if the US$ continues to remain weak against the Euro, then Lignum Co will find it difficult to maintain a sustained advantage against its American competitor. A strategic, long-term viewpoint needs to be undertaken to manage risk of this nature,such as locating production in countries with favourable exchange rates and cheaper raw material and labour inputs or setting up a subsidiary company in the USA to create a natural hedge for the majority of the US$ cash flows.In conclusion, the report examined, discussed and made recommendations on managing foreign exchange exposure in each of the three cases.Report compiled by:Date:APPENDICESAppendix I: Financial impact of derivative products offered by Medes Bank (case one)Using forward rateForward rate = 142 x (1 + (0·085 + 0·0025)/3)/(1 + (0·022 – 0·0030)/3) = 145·23Income in Euro fixed at ZP145·23 = ZP140,000,000/145·23 = €963,988Using OTC optionsPurchase call options to cover for the ZP rate depreciatingGross income from option = ZP140,000,000/142 = €985,915Cost€985,915 x ZP7 = ZP6,901,405In € = ZP6,901,405/142 = €48,601€48,601 x (1 + 0·037/3) = €49,200(Use borrowing rate on the assumption that extra funds to pay costs need to borrowed initially; investing rate can be used if that is the stated preference)Net income = €985,915 – €49,200 = €936,715Appendix II: Financial impact of the devaluation of the Maram Ringit (case two)MR devalued rate = MR35 x 1·20 = MR42 per €1MR ’000 Exposed? € ’000 at € ’000 atcurrent rate devalued rateMR35 per €1 MR42 per €1Non-current assets 179,574 Yes 5,131 4,276Current assets 146,622 60% 2,514 2,095Non-current liabilities (132,237) 20% (756) (630)Current liabilities (91,171) 30% (781) (651)–––––––– –––––– ––––––Share capital and reserves 102,788 6,108 5,090–––––––– –––––– ––––––Translation loss = €6,108,000 – €5,090,000 = €1,018,0003 (a)Number of Sigra Co shares = 4,400,000/0·4 = 11,000,000 sharesSigra Co earnings per share (EPS) = $4,950,000/11,000,000 shares = 45c/shareSigra Co price to earnings (PE) ratio = $3·6/$0·45 = 8Dentro PE ratio = 8 x 1·125 = 9Dentro Co shares = $500,000/0·4 = 1,250,000 sharesDentro Co EPS = $625,000/1,250,000 = 50c/shareEstimate of Dentro Co value per share = $0·5 x 9 = $4·50/shareCash offerDentro share percentage gain under cash offer$0·50/$4·50 x 100% = 11·1%Share-for-share exchangeEquity value of Sigra Co = 11,000,000 x $3·60 = $39,600,000Equity value of Dentro Co = 1,250,000 x $4·50 = $5,625,000Synergy savings = 30% x $5,625,000 = $1,688,000Total equity value of combined company $46,913,000Number of shares for share-for-share exchange11,000,000 + [1,250,000 x 3/2] = 12,875,000Expected share price of combined company $3·644/shareDentro share percentage gain under share-for-share offer[($3·644 x 3 – $4·50 x 2)/2]/$4·50 x 100% = 21·5%Bond offerRate of return。

technical page 54student accountant JUNe/JULY 2008BUSINESS FAILUREPREDICTION AND PREVENTIONRELEVANT TO ACCA QUALIFICATION PAPERS P4 AND P5According to recent statistics from the UK’s Ministry of Justice, almost 12,000 companies filed for insolvency in 2007 in England and Wales. This number is forecast to increase significantly (to around 13,500 companies) in 2008 (Financial Times , 2 January 2008) as the financial crisis hits businesses in the wider economy. Smaller companies are likely to suffer most because of a slowing economy and the increasing costs of borrowing in a deteriorating business environment.THE MODELSCorporate failure models can be broadly divided into two groups: quantitative models, which are based largely on published financial information; and qualitative models, which are based on an internal assessment of the company concerned. Both types attempt to identify characteristics,exhibit the features of previously failing companies. Commonly-accepted financial indicators of impending failure include:low profitability related to assets and commitmentslow equity returns, both dividend and capital poor liquidity high gearing high variability of income.The pioneer of corporate failure prediction models which used financial ratios was William Beaver (1966). He applied a univariate model in which a classification model was carried out separately for each ratio, and (also for each ratio), an optimal cut-off point was identified where the percentage of misclassifications (failing or non-failing) was minimised. The misclassification could be either classifying a failing firm as non-failing (a Type I error), or classifying a non-failing firm as failing (a Type II error). Beaver selected a sample of 79 failed firms and 79 non-failing firms and investigated the predictive power of 30 ratios when applied five years prior to failure. Of the ratios examined, he found that the ‘cash flow to total debt’ ratio (Figure 1) was most significant in predicting failure, with a success rate of 78% for five years before bankruptcy.FIGURE 1: CASH FLOW TO TOTAL DEBT RATIOAlthough the simplicity of the univariate approach is appealing, there are a number of potential problems: Company classification is based on one ratioat a time, which may give inconsistent andconfusing classification results for different ratios used on the same company. It contradicts reality, in that the financial status of a company is complex and cannot be captured by one single ratio.The optimal cut-off point is chosen on anex-post basis, ie when the actual failure status of each company is known. As a result, the cut-off points may be sample-specific and the classification accuracy may be much lower when applied on a predictive basis.The logical solution is to select a combination of ratios, a multivariate approach, in an attempt to provide a more comprehensive picture of the financial status of a company. Following Beaver, Altman (1968) proposed ‘multiple discriminant analysis’ (MDA). This provided a linear combination of ratios which best distinguished between groups of failing andnon-failing companies. This technique dominated the literature on corporate failure models until the 1980s and is commonly used as the baseline for were finally chosen on the basis of their predictive ability. Altman’s original Z score equation was:Z = 0.012X1 + 0.014X2 + 0.33X3 + 0.006X4 + X5Where:X1 = working capital/total assets X2 = retained earnings/total assetsX3 = profit before interest and tax/total assets X4 = market value of equity/book value of debt X5 = sales/total assetsThe pass mark for Altman’s Z score was three, above which companies would be consideredStudents are required to be familiar with failure prediction models based on both quantitative and qualitative information, and also to comprehend the underlying factors leading to the decline and eventual demise of a company. In this article, the various failure prediction models are critically discussed and an attempt is made to identify the most significant reasons for eventual company failure.Cash flow/Total debtYears before failure Key: Non-failed Failedtechnical page 55relatively safe. Companies with Z scores below 1.8 would be classified as potential failures; scores between 1.8 and three were in a grey area. He found a misclassification rate of 5% one year prior to failure and 17% two years prior to failure.FIGURE 2: LINEAR DISCRIMINATE ANALYSISIn the UK, a similar methodology was employed by Taffler and Tishaw (1977) based on a sample of 92 manufacturing companies. The resulting Z score equation was based on a combination of four ratios, albeit with undisclosed coefficients:Z = co + c1X1 + c2X2 + c3X3 + c4X4Where:X1 = profit before tax/current assets (53%)X2 = current assets/current liabilities (13%)X3 = current liabilities/total assets (18%)X4 = no credit interval (16%)The percentages reveal a guide to the relativeweightings of the ratios. Taffler and Tishawclaimed a 99% successful classification based on the original 92 companies from which the model was derived. However, when the model was tested by Taffler (1983) on a sample of 825 companies, the results were less convincing. The equation then classified 115 out of the 825 quoted industrial companies as being at risk. In the following four years, 35% went bankrupt and a further 27% were still at risk.Both Altman and Taffler’s original models were then developed further. Altman et al (1977) addressed the problem of the assumptionregarding the normal distribution of ratios in their ZETA model. Taffler then adapted the Z score technique to develop the Performance Analysis Score (PAS).This forms a ranking of all company Z scores in percentile terms, measuring relative performance on a scale of 0 to 100. A score of X means that 100 - X% of companies have higher Z scores (eg a score of 80 means 20% have higher scores). As the PAS score over time shows the relative performance trend of a company, any downward trend should be investigated immediately.Ezzamel, Brodie and Mar-Molinero (1987) briefly reviewed the earlier research and reported their UK study of financial ratios using factor analysis. Using 53 ratios, they described five broad patterns:capital intensivenessprofitability expressed as earnings, or cash flows as related to assets or funds working capital position liquidity position asset turnover.The last in the category of quantitative models is the H score, devised by Company Watch ( ). As with the Z score, the H score is based on discriminant analysis, in which characteristics of companies are used to optimally discriminate between those which subsequently failed within a specified time period and those which survived. Similar to Taffler’s PAS, it is a ranked percentile score taking a value between 0and 100. The interpretation of a particular H score,for example 20, is that only 20% of companieshave characteristics even more indicative of failedcompanies, and therefore the company’s healthwould be judged as relatively weak. The threshold identified by Company Watch is a score of 25, below which companies are described as being in the ‘Warning Area’. The H score distinguishes between different types of company by using a suite of sub-models – these are associated with a particular categoryof company with broadly similar balanceadequacy of the capital base, dependency ondebt, and dependency on current liabilities.In conclusion, the statistical evidence supporting both univariate and multivariate techniques of predicting failure is generally impressive and oftenreveals considerable predictive power. Certaincaveats should, however, be borne in mind:The precise specification of a model will be sample specific, and decision makers should exercise care when using previous models. The value of a model is difficult to assess without a realistic costing of Type I and II errors.linked performance objectivesperformaNce obJectives 15 aNd 16 are reLevaNt to paper p4stUdYiNg paper p5? check oUt performaNce obJectives 12, 13, aNd 14technical page 56student accountantJUNe/JULY 20081 Financial signs – in the A score context, theseappear only towards the end of the failureprocess, in the last two years (4).2 Creative accounting – optimistic statementsare made to the public and figures are altered (inventory valued higher, depreciation lower,etc). Because of this, the outsider may notrecognise any change, and failure, when itarrives, is therefore very rapid (4).3 Non-financial signs – various signs includefrozen management salaries, delayed capitalexpenditure, falling market share, risingstaff turnover (3).4 Terminal signs – at the end of the failureprocess, the financial and non-financial signsbecome so obvious that even the casualobserver recognises them (1).The overall pass mark is 25. Companies scoring above this show many of the signs preceding failure and should therefore cause concern. Even if the score is less than 25, the sub-score can still be of interest. If, for example, a score over 10 is recorded in the defects section, this may be a cause for concern, or a high score in the mistakes section may suggest an incapable management. Usually, companies not at risk have fairly low scores (0–18 being common), whereas those at risk usually score well above 25 (often 35–70).The A score has therefore attempted to quantify the causes and symptoms associated with failure. Its predictive value has not been adequately tested, but a misclassification rate of 5% has been suggested. While Argenti’s modelQualitative modelsThis category of model rests on the premise that the use of financial measures as sole indicatorsof organisational performance is limited. Forthis reason, qualitative models are based onnon-accounting or qualitative variables. One of the most notable of these is the A score model attributed to Argenti (1976), which suggests that the failure process follows a predictable sequence: DefectsâMistakes madeâSymptoms of failureDefects can be divided into management weaknesses and accounting deficiencies as follows: Management weaknesses:autocratic chief executive (8)failure to separate role of chairman and chiefexecutive (4)passive board of directors (2)lack of balance of skills in management team – financial, legal, marketing, etc (4)weak finance director (2)lack of ‘management in depth’ (1)poor response to change (15).Accounting deficiencies:no budgetary control (3)no cash flow plans (3)no costing system (3).Each weakness/deficiency is given a mark (as shown) or given zero if the problem is not present. The total mark for defects is 45, and Argenti suggests that a mark of 10 or less is satisfactory.If a company’s management is weak, then Argenti suggests that it will inevitably make mistakes which may not become evident in the form of symptoms for a long period of time. The failure sequence is assumed to take many years, possibly five or more. The three main mistakes likely to occur (and attached scores) are:1 high gearing – a company allows gearing torise to such a level that one unfortunate event can have disastrous consequences (15)2 overtrading – this occurs when a companyexpands faster than its financing is capable of supporting. The capital base can become toosmall and unbalanced (15)3 the big project – any external/internal project,the failure of which would bring the company down (15).The suggested pass mark for mistakes is a maximum of 15.The final stage of the process occurs when the symptoms of failure become visible. Argenti classifies such symptoms of failure using the following categories:is perhaps the most notable, a large number of non-accounting or qualitative variables have been included in other studies. These include:company-specific variables – such asmanagement experience, customerconcentration, dependence on one or a fewsuppliers, level of diversification, qualifiedaudit opinions, etcgeneral characteristics – such as industry typefactors in the external environment – suchas the macroeconomic situation, includinginterest rates, the business cycle, and theavailability of credit.OTHER SYMPTONS OF FAILUREMany other lists of symptoms of failure exist. For example, there is a list of 65 reasons on the UK Insolvency website which include:1 Failure to focus on a specific market becauseof poor research.2 Failure to control cash by carrying too muchstock, paying suppliers too promptly, andallowing customers too long to pay.3 Failure to control costs ruthlessly.4 Failure to adapt your product to meetcustomer needs.5 Failure to carry out decent market research.6 Failure to build a team that is compatibleand has the skills to finance, produce, sell,and market.7 Failure to pay taxes (insurances and VAT).8 Failure of businesses’ need to grow. Merelyattempting stability or having even lessambitious objectives, businesses which did not try to grow didn’t survive.technical page 579 Failure to gain new markets.10 Under-capitalisation.11 Cash flow problems.12 Tougher market conditions.13 Poor management.14 Companies diversifying into new, unknownareas without a clue about costs.15 Company directors spending too much moneyon frivolous purposes thus using up allavailable capital.ULTIMATE REASON FOR FAILUREIt has been suggested that the ultimate reason for business failure is poor leadership. According to business guru, Brian Tracy, ‘Leadership is the most important single factor in determining business success or failure in our competitive, turbulent, fast-moving economy.’ Based on a study by theUS Bank, the main reasons why businesses fail are: poor business planningpoor financial planningpoor marketingpoor management.Proper application of these key factors is a function of good leadership. According to the study, in the business planning category, 78% of businesses fail due to the lack of a well-developed business plan. Remember the old saying: ‘If you fail to plan, you plan to fail.’Leadership is about planning for success before it happens. Sun Tzu, the 6th century Chinese philosopher, in his epic work The Art of War, gave some sound advice that still appliesto business today: ‘When your strategy is deep and far-reaching, then what you gain by your calculations is much, so you can win beforeyou even fight. When your strategic thinking is shallow and near-sighted, then what you gain by your calculations is little, so you lose before you do battle.’In the financial planning category, 82%of businesses failed due to poor cash flow management skills, followed closely by starting out with too little money. Business leadership is about taking financial responsibility, conducting sound financial planning and research, and understanding the unique financial dynamics of one’s business. Half of the UK’s small businesses fail within the first three years because of cash flow problems. They either run out of moneyor run out of time. Consumer debt, personal bankruptcies, and company insolvencies are all now on the increase.The third business failure factor profiled in the study, and a critical one, was marketing. Over 64% of the businesses surveyed inthe marketing category failed because their owners ignored the importance of properly promoting their business, and then ignored their competition. Again, as a business leader, you must be able to effectively communicate your idea to the right people and understand their unique needs and wants. Leadership is all abouttaking initiative, taking action, getting thingsdone, and making decisions. If you are not doinganything of significance to market and promoteyour business, you are most likely headed forbusiness failure.You must also know your competition.Leadership is about providing value to customers;if your main competitors are all providing a betterquality and lower priced product, how can youpossibly create any value? Either you harnessyour strengths to provide different benefits (suchas speed, convenience, or better service), loweryour price and improve quality, create a differentproduct for an unmet demand, or get out ofthe game.Finally, one of the most important reasons whybusinesses fail is due to poor management. In themanagement category, 70% of businesses faileddue to owners not recognising their failings andnot seeking help, followed by insufficient relevantbusiness experience. Not delegating properlyand hiring the wrong people were additionalmajor contributing factors to business failure inthis category.An interesting, alternative method ofclassifying reasons for failure is provided byRichardson et al (1994), who use the analogy offrogs and tadpoles:1 Boiled frog failuresThese are long-established organisations whichexhibit the often observed organisationalcharacteristics of introversion and inertia inthe presence of organisational change. Thiscategory can be illustrated by the problemsfaced by ICI.2 Drowned frog failuresLess to do with management complacencyand more to do with managerial ambition andhyperactivity. In the smaller company context,this is the failed ambitious entrepreneur,whereas in the bigger context this is the failedconglomerate kingmaker, perhaps typified byRobert Maxwell.3 BullfrogsExpensive show-offs who need to adornthemselves with the trappings of success.The bullfrog exists on a continuum fromthe ‘small firm flash’ to the ‘money messingmegalomaniac’. The behaviour of bullfrogsoften raises ethical issues due to a failure toseparate business expenditure from personalexpenditure (for example, Conrad Black).4 TadpolesTadpoles never develop into frogs andrepresent the failed business start-up in thesmall business setting. In the large businesscontext, the tadpole is typified by the businesswhich is dragged down by a big new projectwhich turns out to be such an expensivefailure that it destroys its parent. New productsand services often fail, such as the Sinclairhome computer. Small tadpoles usually failto become frogs because of over-optimism, afailure to make contingency plans and a lackof interest in overall success as a result of toomuch focus on the product.AVOIDING FAILUREPerhaps the best way to avoid failure is to examinethe myriad explanations for business failure. Manybooks and articles have focused on identifyingreasons for failure as a remedy for prevention. Oneof the more significant earlier works was by Rossand Kami (1973); they gave ‘Ten Commandments’which, if broken, could lead to failure:1 You must have a strategy.2 You must have controls.3 The Board must participate.4 You must avoid one-man-rule.5 There must be management in depth.6 Keep informed of, and react to, change.7 The customer is king.8 Do not misuse computers.9 Do not manipulate your accounts.10 Organise to meet employees’ needs.FURTHER REFERENCESAltman, E, 1968. Financial ratios,discriminant analysis and the prediction ofcorporate bankruptcy. Journal of Finance.Altman, E, Haldeman, R G, Narayanan, P,1977. ZETA analysis: a new model to identifybankruptcy risk of corporations. Journal ofBanking & Finance.Argenti, J, 1976. Corporate Collapse: TheCauses and Symptoms. McGraw Hill.Beaver, W, 1966. Financial ratios aspredictors of failure. Journal of AccountingResearch, Supplement 4.Ezzamel, M, Brodie, T, Mar-Molinero,C, 1987. Financial Patterns of UKManufacturing companies. Journal ofBusiness Finance & Accounting.Richardson, F M et al, 1994. Understandingthe Causes of Business Failure Crises.Management Decision.Ross, J E and Kani, M J, 1973. CorporateManagement In Crisis: Why the Mighty Fail.Prentice Hall.Taffler, R J and Tishaw, H, 1977. Going,Going, Gone: Four Factors Which Predict.Accountancy, 88.Taffler, R J, 1983. The assessment ofcompany solvency and performance using astatistical model: a comparative UK-basedstudy. Accounting & Business Research, 15.Tzu, S, Zi, S, Giles, L, 2006. The Art of War.Filiquarian Press./NBAWEB/Newsletter2005/2029.htmMichael Pogue is assessor for Paper P5useful Websites。

ACCA考经分享P4 78，P7 72的高分心得张惠，湖南财政经济学院大四党，已过ACCA14门，喜欢脚踏实地的感觉，想做一枚低调的女汉子。

能以P4 78分，P7 72分的成绩出坑实在出乎我的意料，无免考三年考完14门应该是一般人的水平吧，所以非常荣幸能接到主页君的约稿来跟大家分享一下我P4&P7的学习心得。

首先是关于最后四选二阶段的选择的问题。

因为P4有大部分国内学生非常熟悉、得分也非常理想的计算题，再加上学习F9时打下的还算不错的基础，所以我毫不犹疑地选择了这一门Paper。

关于P5还是P7这个问题确实困扰了我许久。

P5一直以来都以它超低的通过率被众多ACCA学员列入黑名单，但是学校又没有开设P7的课程，如果选择P7就得自己看网课学习，因为之前并没有尝试过面授以外的学习方式，所以在5or7的选择上我十分纠结。

在与老师同学交流之后我选择了对自己来说可能会相对轻松一点的P7，因为审计多少还是有些规律可循的，而P5那种paper需要大开脑洞，虽然有大家熟悉的计算部分，但是我对剩下的文字部分实在没有信心，所以我最后还是选择了P7。

然后就是最重要的学习方法啦。

P4我是跟着Kaplan的马老师学的，在这里先感谢一下亲爱的马老师在这一学期里的帮助。

相信大家都知道past exam papers 的重要性，我所有计算类科目pass的秘诀就是前三年真题至少刷三遍，如果对自己不是很有信心的童鞋可以适当往前推一年，前四年真题刷三遍应该是没问题的，前提是你得有充足的时间。

P4我是按照马丹老师的要求从11年6月的题开始做的，很多同学习惯于把知识点学完之后再开始做题，但是我的建议是边学习知识点边做题，这样为后面复习节约了大量时间，同时也可以加深对知识点的理解。

第一遍刷题基本上就是在学习课本知识的同时进行的，这一遍刷题会非常痛苦，由于对知识掌握不牢，我们常常会觉得看完题目后觉得无从下手，在这种情况下可以先阅读考官答案，研究考官的答题思路，理解各种知识点的运用。

ACCA P4企业估价专业资料（一）基本原则反向购买是在某些非同一控制下的企业合并中，发行权益性证券的一方因其生产经营决策在合并后被参与合并的另一方所控制的一种形式。

比如A公司是一家小型上市公司，B 公司投资者持有B公司100%股权。

A公司发行在外的普通股股数为1000万股，新发行1500万股股票给B公司投资者，B公司投资者以持有B公司100%股权作为对价交换。

交易完成后，B公司投资者持有A公司的股数占A公司发行在外的股数的60%，能够对A公司实施控制，将B公司投资者和B公司看作是一家公司，也就是B公司能够对A公司实施控制。

A公司虽发行了权益性证券却被B公司控制，这便是反向购买。

会计上的购买方是以能够对被投资单位实施控制来界定的，但发行权益性证券的一方是被控制的一方，其虽然为法律上的母公司，但其为会计上的被购买方；会计上的购买方是法律上的子公司。

（二）企业合并成本的确定企业合并成本是购买方取得被购买方的控制权付出对价的公允。

对于企业合并成本的确定一定要站在购买方的角度看问题，其企业合并成本就是购买方把被购买方净资产并进来付出对价的公允。

题目一般会给定如何进行交换，比如一股换两股。

将被购买方的股数折算成购买方的股数后乘以购买方的公允价值便是企业合并成本。

非常简单，不要想得太复杂。

（三）合并报表的编制总的原则是：除了股本的数量、每股收益以及少数股东权益要站在法律上母公司（被购买方）的角度，其余都要站在购买方（法律上子公司）的角度考虑。

需要注意的一点是：如果在反向购买中有少数股东权益，少数股东权益反映的是少数股东按持股比例计算享有法律上子公司（购买方）合并前净资产账面价值的份额，与合并报告主体的份额无关。

企业合并成本依然是购买方取得被购买方的控制权付出对价的公允，与有无少数股东权益无关。

对于资产、负债，购买方应按账面价值反映，被购买方应按公允价值反映。

提示：1、被购买方的非流动资产部分不含反向购买时形成的长期股权投资。

ACCA P4最新备考经验分享这篇文章提供给大家一些考前的各种补充，希望各种准备程度的考生都能从中获益。

首先先重点说考试的结构，考试分为Section A和Section B两个部分，其中Section A为一道必答题，分值为50分；Section B包含3道题目，每道题分值25分，所以是从给出的三道题目中选择两道回答！是从给出的三道题目中选择两道回答！是从给出的三道题目中选择两道回答！重要的事情说三遍，因为前两天有一个已经第二次考P4的人居然和小编诉苦说做不完四道题目为什么这么多T^T，我能说什么呢，小编有的时候真的是不能放心（心塞）。

从P4之前2014年的改革之后，P4的主要内容分为四部:第一部分Investment，第二部分Merger& Acquisition，第三部分是Risk Management，剩余的知识统称为Others。

大家要根据自己在这几个模块中的能力来估算自己能否通过P4的考试。

在P4的考试中，题目分数的分配非常合理，50分文字，50分论述，所以对于中国学生来说，只要在擅长的计算部分可以多拿分，那么较为薄弱的论述部分压力就会大大减少。

所以大家要合理根据考试的内容安排自己最后所要重点关注复习的部分，争取保证能拿分的点至少要到60%~70%左右。

对于P4的考试技巧，答题上相信大家一路走来答题的方法已经不用我多说，每个考生都有自己非常独到的做题方法，方法怎么样不重要，重要的是适合你的答题节奏和思路就好。

所以这里还是要说一些最基本的方法：1.读题要先看Requirement，带着问题再去读题目可以帮助你快速识别重点信息，加快做题效率；2.答题结构，这点也是非常重要的，整洁有条理的答案其实是你通过P阶段考试最为重要的而又常常不被人注意的关键，在答题时如果计算类题目的workings一定不能只写计算过程，必须携带必要的文字叙述；。