CS3 Practice Exam Questions with Answers Strategic Case Study Exam 2021 Certification

Daily Gazette

Celebrities flock to release tax returns

Comedian Madd Wilkins is the latest celebrity to post his tax returns online. The comedian earned M$1,600,000 from his sell-out tour and from the sale of DVDs. He paid tax of M$608,000 on that income. The comedian quipped, "there’s nothing funny about paying tax, but then there’s nothing very funny about my act either so it’s only fair that I should pay the full whack".

Public concern about the tax benefits enjoyed by wealthy celebrities using artificial schemes such as investing in forestry to minimise their tax bills has led to closing tax loopholes topping the political agenda. Many wealthy individuals have volunteered their tax files in order to reassure the public that they are not benefitting from such schemes.

The following email has been forwarded to you by William Seaton, Director of Finance:

From: William Seaton, Director of Finance

To: Finance Manager

Subject: Yesterday’s Board meeting

Hi,

One of my fellow Board members made a brief presentation to the Board. I am attaching the slides that were used in this presentation.

I have to say that I thought that some of the advice being offered to the Board was incorrect, but I would rather make a positive contribution to the discussion and so I said very little.

I need you to email me your thoughts on the following:

?Your views on the presentation relating to tax matters

?Your views on the briefing relating to the decision making process

?Your views on the briefing’s recommendations on driving performance

?Finally, an alternative briefing note on driving performance. Ideally, that should be two or three headings, with a

clear explanation for each.

As usual, this is urgent. Many thanks for your help so far with this project.

William

The slides can be found by clicking on the Reference Materials button.

Memorandum of Understanding between Fouce Oil and Slide

It is proposed that Fouce Oil and Slide will temporarily combine their exploration activities, with Slide taking overall control in recognition of the greater expertise of its professional exploration staff.

This collaboration will work as follows:

1.Slide will take responsibility for the management and operation of all future exploration activities for the two companies, with effect from 1 October 2015.

2.Fouce Oil will second all of its professional oil exploration staff to Slide. Fouce will continue to employ these staff and will pay their salaries.

3.Slide will brief Fouce Oil’s professional oil exploration staff on all operational matters relating to exploration activities for the duration of this arrangement.

4.The provisions of paragraph 3 will apply to any projects in which Slide participates with third parties on a farm-in or other joint venture basis.

5.In recognition of Slide’s greater expertise, Fouce Oil will offer its entire portfolio of existing exploration rights to this venture, without any charge to Slide. Fouce Oil will also pay for 55% of any and all exploration costs, leaving Slide responsible for the remaining 45%.

6.The revenues from all successful discoveries will be shared equally by Slide and Fouce Oil. In the event that either party wishes to sell an oil well, the other will have the option of purchasing the other’s rights for 50% of the well’s agreed valuation.

7.This arrangement will be subject to review at the end of five years and annually thereafter. In the event that either party wishes to discontinue the arrangement, all ongoing exploration projects will be drawn to an orderly conclusion.

Signed

Thomas Yip, Chief Executive Officer, Fouce Oil

Andrew Jones, Chief Executive Officer, Slide

14 May 2015

The following email has just arrived:

From: William Seaton, Director of Finance

To: Finance Manager

Subject: News article

Hi,

My Secretary has drawn my attention to the attached newspaper clipping. I have been reading comments like this since Fouce Oil acquired its interest in 2010. We briefed the press at the time and made it clear that we would not be commenting further on our relationship with it unless it changed materially. Nothing has happened since then to make us change our mind on that.

The Board has asked me to compile a report on the following:

?How might the presence of Fouce Oil, as a 25% shareholder, affect our decision making as a Board of Directors? Perhaps, surprisingly, we have never had a formal discussion of this matter.

?How will Fouce Oil’s stake in Slide affect our share price?

I would like you to email me your thoughts on these points so that I can have as long as possible to think about what I will say to the Board.

Thanks

William

The newspaper clipping can be found by clicking on the Reference Materials button.

Six months have passed since you briefed William Seaton, Director of Finance on the relationship between Slide and Fouce Oil.

You have been called into William Seaton’s office:

“We had a visit from the Chief Executive Officer of Fouce Oil yesterday. We had not received any prior notice of the purpose of the visit and assumed that he simply wished to make a courtesy call while he was visiting Fouce Oil’s subsidiary in this country. Instead, he came to initiate discussions over a strategy of collaboration on oil exploration.

Rather than explain things myself, please read the memorandum of understanding that he has asked us to sign. It is self-explanatory.

Once you have read the memorandum, I would like you to email me your thoughts on the following:

?The suitability of this proposal for Slide.

?The likelihood that Fouce Oil’s strategic interests will clash with our own.

?The strategic risks that are likely to arise because of this arrangement.

?The manner in which this strategic relationship should be communicated to the stock market.

I realise that this is a challenging request, but I need your response quickly because we need to respond to Fouce Oil.”

The Memorandum of Understanding can be found by clicking on the Reference Materials button.

A week later, Romuald Marek stops by your workspace and hands you a document.

The Board minute extract from Romuald can be viewed by clicking the Reference Material button above.

Reference Material

Board minutes extract: proposal to profit from ongoing strength of NS

Anna Obalowu Sole, Chief Operating Officer, reported that the strong NS was helping generate revenues from fuel sales. Discussion followed as to whether the strong N$ was likely to persist and whether a strong N$ benefits Arrfield overall.

Markus Jokela. Chief Executive Officer, stated that the Board should develop contingency plans that could be implemented if it seemed likely that the strong N$ would persist. In particular. Arrfield need not renew the contracts that permit aviation fuel suppliers to operate from its airports. Arrfield would then be free to create its own fuel sale business, buying fuel in bulk to replenish the storage tanks at each of its airports in Norland and then selling it directly to airlines He stated that this would almost certainly enhance Arrfield's share price

Romuald Marek reminded the Board that four of Arrfield's six airports are located in Norland and that those airports charge for aeronautical and non-aeronautical services in N$.

A month later, you receive the following email:

Reference Material:

From: Hesham El-Sayed. Independent Non-executive

Director

To: Romuald Marek. Chief Finance Officer

Subject: Collapse of fuel supplier

Hi Romuald

I am writing to give you some advance notice of an internal audit investigation that has been commissioned by the Audit Committee

Just over a year ago. Planejoos, a newly formed company, approached the management team at Airfield's Capital City International (CCI) airport and offered to take over refueling operations at Starport Planejoos offered a higher percentage of revenue than the existing supplier was paying CCI's management team agreed and appointed Planejoos rather than renew the existing supplier's contract.

CCI was unable to conduct the usual background and credit checks on Planejoos for two reasons. Firstly, Planejoos was a new company and so did not have an extensive credit history that could be checked Secondly CCI was under time pressure to reach a decision on whether to renew the existing supplier's contract or allow it to expire

CCI's management team claimed that it had acted quickly in order to benefit from the additional revenue that could be earned from dealing with Planejoos The management team was acting on the basis that it had an ethical duty to maximise the wealth of Airfield's shareholders and that maximising revenues from fuel sales through this agreement with Planejoos was consistent with that ethical duty.

Unfortunately, as a new company. Planejoos struggled to obtain trade credit and the high demand for fuel put the company's cash flows under extreme pressure Receipts from sales lagged behind payments for inventory Planejoos has now collapsed, leaving a large trade receivable that CCI will have to write off as uncollectable CCI had permitted this receivable to accumulate rather

than pressing for payment and so putting Planejoos under further pressure.

Fortunately, the previous fuel supplier was prepared to return to CCI.

Kind regards

Hello

I have attached a news article

Arrfield does not set the price for aviation fuel sold at our airports, but we do receive a percentage of the revenues earned by the fuel companies.

I need your help to prepare for a Board meeting to discuss this matter Please write a paper covering the following

* Firstly, explain the impact that the criticisms voiced by the environmental campaigners will have on the frequent PESTEL analysis that Arrfield's Board conducts.

[sub-task (a) = 34%

* Secondly, evaluate the commercial logic of Arrfield's strategy of basing charges for non-aeronautical services (such as fuel sales and retail activities) on percentages of the revenues generated by the companies that operate at its airports

[sub-task (b) = 33%)

* Thirdly, recommend with reasons whether Arrfield should attempt to justify strategic decisions to its shareholders when the commercial logic of those decisions is not immediately obvious

[sub-task (c) = 33%}

Thanks

Romuald Marek

Chief Finance Officer