MAC3761
EXAM PACK
STUDENT GYDE
GUIDING STUDENTS ON THEIR ACADEMIC
JOURNEY
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Organisational
Strategy
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Shareholder Wealth - Illustration 1
Year Share Price Dividend Paid
2007 3.30 40c
2008 3.56 42c
2009 3.47 44c
2010 3.75 46c
2011 3.99 48c
There are 2 million shares in issue.
Calculate the increase in shareholder wealth for each year:
II. Per share
III. As a percentage
IV. For the business as a whole
Solution
Year Share Share Price Div Increase As a Total
Price Growth Paid in Percentage Shareholder
S’holder Return
Wealth
2007 3.30 40c
2008 3.56 (3.56 - 3.30) = 26c 42c (26 + 42) = () = 2m x 68c =
68c 20.6% $1.36m
2009 3.47 (3.47 - 3.56) = -9c 44c (-9 + 44) = () = 2m x 35c =
35c 9.8% $0.70m
2010 3.75 (3.75 - 3.47) = 28c 46c (28 + 46) = () = 2m x 74c =
74c 21.3% $1.48m
2011 3.99 (3.99 - 3.75) = 24c 48c (24 + 48) = () = 2m x 72c =
72c 19.2% $1.44m
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Objective Test Questions
1. Which of the following statements does not relate to a profit making entity?
A. They exist primarily to increase the wealth of their shareholders.
B. They do not tend to have non-financial objectives.
C. They have other stakeholders besides shareholders to consider.
D. They have to find a balance between the risks in a strategy and the rewards to
shareholders.
Answer B
2. Which of the following statements relating to the ‘Agency Problem’ is NOT correct?
A. The management of the organisations are the agents of the shareholders who are the
principle.
B. The problem arises where management focus on their own short term interests to the
detriment of long term shareholder interests.
C. The problem may be greater in organisations where management accountability is low
and shareholders are not well informed.
D. As management accountability increases so the agency problem increases.
Answer D
3. ABC Co. Paid out a dividend of 35c last year and 42c this year per share. Their share
price has increased from $4.33 to $5.24 in that time. What is the percentage
shareholder return in the current year.
A. 20.00%
B. 21.10%
C. 30.72%
D. 24.39%
Answer C
Increase in Share Price (4.33 to 5.24) = 91c
Dividend Paid this year = 42c
Return Per Share = 133c
As a % of previous year Share Price (133/433) = 30.72%
4
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4. HHH Co. is a listed, muti-national entity which has recently issued a statement
confirming it’s main non-financial objectives. Which of the objectives outlined below
could be criticised for not meeting the SMART criteria?
A. To reduce the carbon footprint of the organisation by 10% by 20X7.
B. To ensure that customer satisfaction is the highest in the industry.
C. To double market share within the next 5 years.
D. To ensure that ethnic minorities make up at least 20% of the employees in the
organisation within the next 3 years.
Answer B
5. Ideas Regional Hospital Trust is a publicly owned health provider being run as part of
the National Health Service of Einsteinland. Recently an audit by the national regulators
has highlighted 3 key problems:
1. The Key Performance Indicator of keeping spend per bed below $4 was not met
2. An overspend of $500,000 compared to budget on surgical gloves was discovered.
3. The primary target of the trust to treat all emergency patients within 1 hour was not met.
These failures are failures of:
A. 1. Economy 2. Effectiveness 3. Efficiency
B. 1. Effectiveness 2. Economy 3. Efficiency
C. 1. Efficiency 2. Economy 3. Effectiveness
D. 1. Efficiency 2. Effectiveness 3. Economy
Answer C
Kaplan Exam Kit Questions 1 - 5 and 7
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Integrated
Reporting I
6
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EXAM PACK
STUDENT GYDE
GUIDING STUDENTS ON THEIR ACADEMIC
JOURNEY
, lOMoARcPSD|8436517
Stuvia.com - The Marketplace to Buy and Sell your Study Material
Organisational
Strategy
2
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, lOMoARcPSD|8436517
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Shareholder Wealth - Illustration 1
Year Share Price Dividend Paid
2007 3.30 40c
2008 3.56 42c
2009 3.47 44c
2010 3.75 46c
2011 3.99 48c
There are 2 million shares in issue.
Calculate the increase in shareholder wealth for each year:
II. Per share
III. As a percentage
IV. For the business as a whole
Solution
Year Share Share Price Div Increase As a Total
Price Growth Paid in Percentage Shareholder
S’holder Return
Wealth
2007 3.30 40c
2008 3.56 (3.56 - 3.30) = 26c 42c (26 + 42) = () = 2m x 68c =
68c 20.6% $1.36m
2009 3.47 (3.47 - 3.56) = -9c 44c (-9 + 44) = () = 2m x 35c =
35c 9.8% $0.70m
2010 3.75 (3.75 - 3.47) = 28c 46c (28 + 46) = () = 2m x 74c =
74c 21.3% $1.48m
2011 3.99 (3.99 - 3.75) = 24c 48c (24 + 48) = () = 2m x 72c =
72c 19.2% $1.44m
3
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Objective Test Questions
1. Which of the following statements does not relate to a profit making entity?
A. They exist primarily to increase the wealth of their shareholders.
B. They do not tend to have non-financial objectives.
C. They have other stakeholders besides shareholders to consider.
D. They have to find a balance between the risks in a strategy and the rewards to
shareholders.
Answer B
2. Which of the following statements relating to the ‘Agency Problem’ is NOT correct?
A. The management of the organisations are the agents of the shareholders who are the
principle.
B. The problem arises where management focus on their own short term interests to the
detriment of long term shareholder interests.
C. The problem may be greater in organisations where management accountability is low
and shareholders are not well informed.
D. As management accountability increases so the agency problem increases.
Answer D
3. ABC Co. Paid out a dividend of 35c last year and 42c this year per share. Their share
price has increased from $4.33 to $5.24 in that time. What is the percentage
shareholder return in the current year.
A. 20.00%
B. 21.10%
C. 30.72%
D. 24.39%
Answer C
Increase in Share Price (4.33 to 5.24) = 91c
Dividend Paid this year = 42c
Return Per Share = 133c
As a % of previous year Share Price (133/433) = 30.72%
4
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4. HHH Co. is a listed, muti-national entity which has recently issued a statement
confirming it’s main non-financial objectives. Which of the objectives outlined below
could be criticised for not meeting the SMART criteria?
A. To reduce the carbon footprint of the organisation by 10% by 20X7.
B. To ensure that customer satisfaction is the highest in the industry.
C. To double market share within the next 5 years.
D. To ensure that ethnic minorities make up at least 20% of the employees in the
organisation within the next 3 years.
Answer B
5. Ideas Regional Hospital Trust is a publicly owned health provider being run as part of
the National Health Service of Einsteinland. Recently an audit by the national regulators
has highlighted 3 key problems:
1. The Key Performance Indicator of keeping spend per bed below $4 was not met
2. An overspend of $500,000 compared to budget on surgical gloves was discovered.
3. The primary target of the trust to treat all emergency patients within 1 hour was not met.
These failures are failures of:
A. 1. Economy 2. Effectiveness 3. Efficiency
B. 1. Effectiveness 2. Economy 3. Efficiency
C. 1. Efficiency 2. Economy 3. Effectiveness
D. 1. Efficiency 2. Effectiveness 3. Economy
Answer C
Kaplan Exam Kit Questions 1 - 5 and 7
5
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Integrated
Reporting I
6
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