Page 21 - CIMA SCS Workbook February 2019 - Day 2 Tasks

FINANCIAL STRATEGY (F3) - PRACTICE TASKS

EXERCISE TWO

UPDATE
You arrive at work on a Monday morning to find a note from Paul Pau, Vita’s Chief Finance
Officer, on your desk. He has asked you to meet him in his office at 09.00, to discuss the contents
of an email he has received from Pamela Simmons (one of the Vita non-executive directors).

TRIGGER

“Hi there.

On Friday I received this email from Pamela. I’ve printed it out so that you’ve got a copy (see
reference materials).

She’s right that Vita’s return on equity has reduced. Of course we know that this is mainly because
we’ve been investing increasing amounts in R&D, but I think she’s right that the shareholders
might see this fall in return on equity alongside a slowdown in sales growth as a negative signal.

Therefore, I think it is a good idea to consider growth options for Vita that could help to send a
positive signal to the shareholders and to generate more shareholder wealth for them in the
future.

The trouble is that I’m tied up with the auditors at the moment, so I don’t have time to prepare
anything to present at the Board meeting.

To help me out, I’d like you to prepare some briefing notes for me on the following two key
issues:

First, could you explain what are the advantages and disadvantages of growth by acquisition
compared to organic growth?

Second, please give some examples of the sort of synergies that could be generated if Vita
decided to acquire another company in the same industry.

This is quite urgent – the next Board meeting is on Wednesday. Could you please try to get the
briefing notes to me by lunch time?”

TASK

Prepare some briefing notes for Paul Pau as requested. (Time allowed: 60 minutes)

(Refer to the Reference Materials overleaf)

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