Page 23 - CIMA SCS Workbook February 2019 - Day 2 Tasks

FINANCIAL STRATEGY (F3) - PRACTICE TASKS

EXERCISE THREE

UPDATE

You have just received the following email from Paul Pau, Vita’s Chief Finance Officer.

TRIGGER

Email

To: Senior Finance Manager
From: Paul Pau
Subject: Dividends

This morning I have received an email from Chris Heloise, who is the investment manager at one
of our largest institutional shareholders, Goya Co. I’ll send you a copy of her email.

I’m afraid Chris is unhappy with Vita’s dividend policy, so she’s asked to meet me later in the week
to talk to her about it.

To help me with this, I’d like you to prepare some notes for me on dividend policy.

First, could you explain in general terms what are the key issues to consider when setting a
dividend policy? Don’t worry yet about applying your ideas to Vita. I want an overview of all the
key issues first, and then a brief overview of the main dividend policies that companies can follow.

Second, could you explain the meaning of the terms “scrip dividend” and “share repurchase” and
briefly outline the advantages and disadvantages to Vita of employing these strategies.

Please could you put your thoughts in an email, and send it to me by the end of the day.

TASK

Prepare the email requested by Paul Pau. (Time allowed: 60 minutes)

(Refer to the reference materials overleaf)

KAPLAN PUBLISHING 39