CIMA Exam CIMAPRA19-F03-1 Topic 1 Question 8 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 8
Topic #: 1

[All CIMAPRA19-F03-1 Questions]

The Board of Directors of a listed company is considering the company's dividend/retentions policy.

The inflation rate in the economy is currently high and is expected to remain so for the foreseeable future.

The board are unsure what impact the high level of inflation might have on the dividend policy.

Which THREE of the following statements are true?

AThe high inflation rate does not need to be considered when determining the dividend policy.

BConsideration should be given to the fact that shareholders will have a desire for real growth in dividend.

CRetained earnings for reinvestment will have to earn a return in excess of the inflation level.

DThe impact of inflation on the cash flows should be considered when formulating the dividend policy.

EIn periods of high inflation 100% of earnings should always be paid out as dividends so that shareholders can protect their wealth against the impact of inflation.

Show Suggested Answer

Suggested Answer: B, C, D

by Evangelina at May 08, 2022, 09:11 PM

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