Part 3 Flashcards

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
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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
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3
Q

Criteria considered in initial project appraisal

A
  • Financial results and risks
  • Synergies
  • Political constraints
  • Sufficient upside potential
  • Best use of scarce resources
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4
Q

Specific risks can be identified by

A
  • High-level preliminary risk analysis
  • Brainstorming session
  • Desktop analysis
  • Risk register
  • Risk matrix
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5
Q

Characterise risks by

A
  • Frequency
  • Consequence
  • Controllability
  • Correlation between risks
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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
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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
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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
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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
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10
Q

Circumstances making cash attractive

A
  • Rising interest rates
  • Economic recession
  • Weakening domestic currency
  • General economic uncertainty
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11
Q

Yield curve theories

A
  • Expectations theory
  • Liquidity preference theory
  • Inflation risk premium theory
  • Market segmentation theory
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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
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13
Q

Listed companies are generally more

A

• Marketable
• Secure
• Easy to value
Than unlisted companies

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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
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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
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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.