1
Q
Key factors in managing a successful project
A
- A clear definition of the aim of the project, reflecting the customer’s needs
- Full planning
- Thorough risk analysis
- Regular monitoring of developments
- Measurement of performance and quality standards
- Thorough testing at all stages
- Management of critical path issues
- Appropriate pacing to ensure that the right things get done at the right time
- Challenging but stable relationships with external suppliers
- A supportive environment
- Excellent communication between everyone involved
- Positive conflict management
- A schedule of what needs to be reviewed at each milestone review point
2
Q
Written strategy contains details of:
A
- Project objectives
- Financial and economic objectives
- Statement of how the objectives will be met
- Breakdown of the work to be done
- Key milestones for project review
- Quality standards for meeting objectives
- Project sponsor’s role
- Role of any third parties
- Expected cost of project
- Need for insurance or reinsurance
- Financing policy
- Technical policy
- Legal policy
- Risk management policy
- Communications policy
- IT policy
3
Q
Criteria considered in initial project appraisal
A
- Financial results and risks
- Synergies
- Political constraints
- Sufficient upside potential
- Best use of scarce resources
4
Q
Specific risks can be identified by
A
- High-level preliminary risk analysis
- Brainstorming session
- Desktop analysis
- Risk register
- Risk matrix
5
Q
Characterise risks by
A
- Frequency
- Consequence
- Controllability
- Correlation between risks
6
Q
Ways of Mitigating Risks:
A
- Avoiding the risk
- Reducing the risk – either reducing the probability of occurrence or the consequences or both
- Reducing uncertainty
- Transferring risk
- Insuring risk
- Sharing risk with another party
7
Q
Mitigation option will be assessed considering
A
- The effect on the frequency and consequence
- Cost and feasibility of implementation
- Any secondary risks that arise
- Mitigation for secondary risks
- Overall effect on the NPV
8
Q
Considerations in the investment decision beyond the investment submission
A
- Allowance for likely bias of approximation of estimates
- Hunch
- Knowledge not in possession of those who formed the investment submission
- Last-minute developments
- Overall project credibility
9
Q
Liquidity reasons for holding money market instruments
A
- To meet short term liabilities
- To take advantage of investment opportunities
- If outgo is uncertain
- If money has been received and is waiting for investment in other asset classes
- To protect the monetary value
10
Q
Circumstances making cash attractive
A
- Rising interest rates
- Economic recession
- Weakening domestic currency
- General economic uncertainty
11
Q
Yield curve theories
A
- Expectations theory
- Liquidity preference theory
- Inflation risk premium theory
- Market segmentation theory
12
Q
Reasons market may be uncertain about future inflation
A
- Less government commitment to low inflation
- Loose monetary policy
- Rapid economic growth
- Devaluation of domestic currency
13
Q
Listed companies are generally more
A
• Marketable
• Secure
• Easy to value
Than unlisted companies
14
Q
It is sensible for investment analysts to specialise within particular investment sectors because:
A
- The factors affecting one company within an industry are likely to be relevant to other companies in the same industry
- Much of the information for companies in the same industry will come from a common source and will be presented in a similar way
- No one analyst can expect to be an expert in all areas, so specialisation is appropriate
- The grouping of equities according to some common factor gives structure to the decision-making process. It assists in portfolio classification and management
15
Q
Share prices in an industry are correlated because
A
- Same resources – similar input costs
- Supply to same markets – similarly affected by changes in demand
- Similar financial structure – similarly affected by changes in interest rates
16
Q
Typical features of Preference Shares:
A
- Preference shareholders are normally entitled to a specified rate of dividends and are not entitled to residual profits. They are more like fixed-interest bonds.
- Dividend is usually a fixed percentage of the par value and is always paid before any distributions to ordinary shareholders
- Dividend is normally treated in exactly the same way for tax purposes as that paid on ordinary shares
- Dividend rate is quoted net of tax
- Dividends do not have to be paid if profits are insufficient
- They are generally cumulative so that if a dividend is unpaid, the arrears must also be paid off before any payment is made to ordinary shareholders
- They usually rank before ordinary shares for repayment on winding up
- Most preference shares have no final redemption date
- They do not normally carry voting right.
