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INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN Fall (Winter) 2010 Examinations

Wednesday, the 1st December 2010


MANAGEMENT ACCOUNTINGBUSINESS STRATEGY (S-603) STAGE-6 Time Allowed 2 Hours 45 Minutes (i) (ii) (iii) (iv) (v) (vi) (vii) Maximum Marks 90

Attempt all questions. Answers must be neat, relevant and brief. In marking the question paper, the examiners take into account clarity of exposition, logic of arguments, effective presentation, language and use of clear diagram/ chart, where appropriate. Read the instructions printed on the top cover of answer script CAREFULLY before attempting the paper. Use of non-programmable scientific calculators of any model is allowed. DO NOT write your Name, Reg. No. or Roll No. anywhere inside the answer script. Question No. 1 Multiple Choice Question printed separately, is an integral part of this question paper.

Marks Q. 2 (a) Environmental scanning or industry analysis reveals key opportunities and threats confronting an organization so that managers can formulate strategies to take advantages of opportunities and avoid or reduce the impact of threats. Competitive analysis is imperative for anticipating external threats. Collecting and evaluating information on competitors is essential for successful strategy formulation. One of the widely used approaches for competitive analysis is Porters Five-Forces Model. Illustrate and describe Porters Five Forces Model of Competition. Briefly touch upon three steps for using Porters Five Forces Model. Strategists never consider all feasible alternatives that could benefit the firm because there are an infinite number of possible actions and an infinite number of ways to implement those actions. Therefore, a manageable set of the most attractive alternative strategies must be developed. The advantages, disadvantages, trade-offs, costs and benefits of these strategies should be determined. Important strategic formulation techniques can be integrated into a three-stage decision making framework namely the Input Stage, Matching Stage and the Decision Stage. In matching stage organizations try to match its internal resources and skills with the opportunities and risks created by its external factors. Among the techniques of matching stage BCG Matrix has long been used by various organizations. Illustrate and describe in detail the Boston Consulting Group (BCG) Matrix. Discuss the dimensions of culture while making strategic choices. Define strategies. Firms do require intensive efforts if its competitive position with existing products or services is to improve. Identify and discuss three types of intensive strategies. Changes in strategy often require changes in the way an organization is structured for two major reasons. First, structure largely dictates how objectives and policies will be established. The second major reason is that structure dictates how resources will be allocated. Elaborate three broad types of organizational structures in the context of implementing the strategy.

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(b) Q. 3 (a)

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(b) Q. 4 (a) (b)

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Q. 5

(a)

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Marks (b) No organization or individual can escape change. The strategic management process itself can impose major changes on individuals and processes. How can a manager manage resistance to change during implementation stage? A basic premise of good strategic management is that firms plan ways to deal with unfavourable and favourable events before they occur. Strategists cannot and should not try to cover all bases by planning for all possible contingencies. But in any case contingency plans should be as simple as possible. Briefly state at least four contingency plans usually followed by organizations. Consider the following balance sheet and selected data from income statement of a company. Balance Sheet Rs. 000 June 30 Assets: 2010 2009 Cash 4,500 3,000 Marketable securities 5,400 3,600 Accounts receivable 6,000 5,400 Inventories 8,700 8,400 Total current assets 24,600 20,400 Gross fixed assets 88,500 84,300 Less: Accumulated depreciation 44,100 39,300 Net fixed assets 44,400 45,000 Total assets 69,000 65,400 Liabilities & shareholders equity: Accounts payable 4,800 4,500 Notes payable 8,400 6,600 Accrued expenses 600 900 Total current liabilities 13,800 12,000 Long-term debt 15,000 15,000 Ordinary share capital 30,000 30,000 Retained earnings 10,200 8,400 Total shareholders equity 40,200 38,400 Total liabilities & shareholders equity 69,000 65,400 Data from Income statement (2010): 34,800 Depreciation expenses EBIT 8,100 Taxes 2,799 Net profit after tax 4,200

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(c)

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Q. 6

Required: (a) Calculate the firms: (i) Accounting cash flow. (ii) Operating cash flow. (iii) Firms free cash flow. (b) (c) Interpret, compare and contrast your cash flow estimates at (i), (ii) & (iii) above. Analysis of projected financial statements allows an organization to examine the expected results of various actions and approaches. How does financial manager fulfill this objective while carrying out the evaluation of pro forma statements? THE END

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