CIMA F3 Exam With Confidence Using Practice Dumps

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

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

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

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

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

The company is repurchasing and cancelling its own shares.

When shares are cancelled:

Share capital is reduced by the nominal value of the shares bought back. ✅

Any amount paid above nominal value reduces equity reserves (such as share premium and/or retained earnings), but it does not go through the Income Statement.

Total equity does decrease by the full repurchase amount (so option C is wrong).

No element of the repurchase (including any “premium to market value”) is treated as an expense in the Income Statement under IFRS – it’s purely an equity transaction (so D is wrong).

Option A is too specific and not strictly correct, because the premium over nominal is not necessarily all charged only to retained earnings – it can also be charged to share premium / other reserves.

So the one fully correct statement is:

B. The share capital figure would reduce by the nominal value of the shares purchased.

Company issues new shares and uses proceeds to repay high-interest debt.

Effects:

Cost of equity (A): financial risk falls as gearing falls → cost of equity is more likely to decrease, not increase.

Number of shares (B): new share issue → increases.

Corporate tax payment (C): interest expense falls, taxable profit rises → tax paid increases.

Gearing (D): debt falls and equity rises → gearing decreases, not increases.

Interest cover (E): operating profit unchanged, interest lower → interest cover increases.

Answer: B, C and E