CWA ICWA Final - Group III : Management Accounting - Strategic Management - December 2011

CWA ICWA Final - Group III • Management Accounting - Strategic Management • December 2011

This Paper has 48 answerable questions with 0 answered.

F–P13(MSM) Syllabus 2008
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks.
SECTION I (60 Marks) (Strategic Management)
Answer Question No. 1 and any other two more questions from the rest in this section. (Please answer all part of the question at one place)

The figures in the margin on the right side indicate full marks.

SECTION I (60 Marks)
(Strategic Management)

Answer Question No. 1 and any other two more questions from the rest in this section.
(Please answer all part of the question at one place)

(a)

In each of the cases/statements given below, one of four alternatives is correct. Indicate the correct answer:

1x10

(i)

Brand names such as Coca–Cola, Sony, M_cDonald’s and Nike are a source of competitive advantage as:

A.	They are owned by global firms
B.	They are more than 50 years old
C.	They are well–managed brands
D.	They are highly innovative firms

(0)

(ii)

The product life cycle is decreasing for an increasing number of products, because of:

A.	Technological changes in materials and processes
B.	Changing tastes of consumers
C.	Competitive activity aimed at increasing market share
D.	All of the above

(0)

(iii)

The acquisition of Corus by TISCO is an example of:

A.	Horizontal integration
B.	Vertical integration
C.	Concentric diversification
D.	Forward integration

(0)

(iv)

Focus on cost reductions:

A.	May result in overlooking competitor’s efforts to differentiate what has traditionally been an indifferentiated commodity like product
B.	Is the best way to compete to earn higher profits
C.	Takes care of changes in customer needs and expectations
D.	Cannot create value for the customers

(0)

(v)

Target price is:

A.	Market driven
B.	Product driven
C.	Cost driven
D.	Investment driven

(0)

(vi)

Which one of the following is not a measure related to Balanced Score Card?

A.	Financial
B.	Customer satisfaction
C.	Internal processes
D.	Gap Analysis

(0)

(vii)

Value analysis aims at:

A.	Increasing sales by economizing expenditure and increasing productivity
B.	Reducing costs by economizing expenditure and increasing productivity
C.	Reducing Profits by increasing expenditure and increasing productivity
D.	Reducing costs by economizing expenditure-and increasing manpower

(0)

(viii)

Forecasting models like Regression analysis and Economic modeling fall in the category of:

A.	Native Quantitative model
B.	Casual Quantitative model
C.	Delphi model
D.	Normal group technique

(0)

(ix)

An increase in productivity, augmented by automation, as one of the environmental factors that can affect an organization’s strategy, should be classified as the:

A.	Economic change in environment
B.	Demographic change in environment
C.	Technological change in environment
D.	Industry change in environment

(0)

(x)

The Corporate Governance framework should ensure:

A.	Equitable treatment of all shareholders
B.	Rights of stakeholders as established by law
C.	Timely and accurate disclose of all material matters including finance, performance and ownership of the company
D.	All of the above and social responsibility

(0)

(b)

State whether the following statements based on the quoted terms are ‘True’ or ‘False’ with justifications for your answer. If any statement is ‘false’, you are required to give the correct terms duly quoted. No credit will be given for any answer without justifications.

1x5

(i)

Cash Reserve Ratio (CRR) refers to the cash which banks have to maintain with RBI as a percentage of their demand and time liability.

(0)

(ii)

Ansoff proposed that for filling the corporate planning gap, one follows four strategies, namely, market penetration, product differentiation, market identification and diversification.

(0)

(iii)

Delphi can never be useful as a sales forecasting tool though it may be a reasonably good tool for demand estimating.

(0)

(iv)

Blue Ocean Strategy is concerned with moving into new market with new product.

(0)

(v)

CVP model is a simple break–even model.

(0)

(c)

Define the following terms (in not more than two sentences):

1x5

(i)

Barriers to entry

(0)

(ii)

Value tests

(0)

(iii)

Turnaround management

(0)

(iv)

Direct Product Profitability (DPP)

(0)

(v)

Strategic Advantage Profile (SAP)

(0)

(a)

Discuss in brief the elements of a meaningful mission statement of a corporate organization.

5+5+
(2+6+2)

(0)

(b)

Explain the linkage between environmental analysis and strategic management.

(0)

(c)

What is ‘Profit planning’? What is ‘Boston classification’? Why the Public Sector Insurance Companies have started using BCG services of late?

(0)

(a)

The following data are available from the records of a company:
Capital: Rs. 10,000
NO PAT: Rs. 2,000
Cost of Capital (C*) : 15 per cent.
Return on Capital (r): 20 per cent
Economic Value Added (EVA) = Capital × (r − C*) = 10,000 (0.20 −0.15) = 500.

Illustrate and quantify the impact of the four strategies [i.e., Improvement in operating performance, Profitable investment, Withdrawal of unproductive capital and Reduction in the cost of capital ] on improving EVA using above recorded data.

2½x4

(0)

(b)

Define a PPP in the context of developmental efforts in infrastructure in India

2.5

(0)

(c)

What is meant by Strategic Total Cost Management? Mention the specific tools with which the Management Accountant should associate himself in the implementation of Strategic TCM in an organization.

2½
+5

(0)

Write short notes on the following:

5x4

(a)

Conglomerates and Diversified Majors

(0)

(b)

Kaizen Costing

(0)

(c)

M_cKinsey’s 7₈Framework

(0)

(d)

J. Strauss and R. Frost’s E–marketing model

(0)

SECTION II (40 Marks) (Risk Management)
Answer Question No.5 and any other two more questions from the rest in this Section. (Please answer all part of the question at one place)

SECTION II (40 Marks)
(Risk Management)

Answer Question No.5 and any other two more questions from the rest in this Section.
(Please answer all part of the question at one place)

(a)

In each of the cases/statements given below, one of four alternatives is correct. indicate the correct answer

1x5

(i)

ECOR in risk management means:

A.	Expected Cost of Ruin
B.	Expected Cost of Opportunity Loss
C.	Economic Cost of Ruin
D.	Economic Cost of Opportunity Loss

(0)

(ii)

Post–loss objectives in risk management are:

A.	Survival of the organization. continuance of organization's operations
B.	Initiate and improve the income/earnings
C.	Obligation to society
D.	All of the above

(0)

(iii)

Physical risk arising out of social, political, economical and legal environments are often identified:

A.	Through the performance of lead indicators
B.	Through the performance of lagging indicators
C.	Through the performance of lead and lagging indicators
D.	Through the performance of the government

(0)

(iv)

Often analysts focus on characteristics of loss distribution such as:

A.	Expected loss
B.	Standard Deviation of loss
C.	Maximum probable loss
D.	All of the above

(0)

(v)

Risk management strategies are:

A.	Avoid risk, Reduce risk, and Retain risk
B.	Combine risks, Transfer risk, and Share risk
C.	Hedge risk
D.	All of the above

(0)

(b)

State whether the following statements based on the quoted terms are ‘True’ or ‘False’ with justifications for your answer. If any statement is false, you are required to give the correct terms duly quoted. No credit will be given for any answer without justifications.

1x5

(i)

EPD in risk management means ‘Expected Policyholder Deficit’.

(0)

(ii)

Performance related risk measures include shortfall risk.

(0)

(iii)

Interest rate risk refers to the uncertainty of market volumes in the future and the quantum of future income caused by the variations in the interest rates.

(0)

(iv)

The IRDA regulates all kinds of insurance related activities in India.

(0)

(v)

‘Future’ a derivative, is used as a hedging mechanism against ‘Risk’.

(0)

(a)

In today’s environment, financial firms operate in increasingly complex, competitive and global challenging market. In the light of this statement, can you briefly describe the various risks prevalent in the financial services?

5+4+
(3+3)

(0)

(b)

What types of risks a firm may face while developing a new product?

(0)

(c)

Explain the concept of ‘Risk Pooling’ and ‘Diversification of Risk’.

(0)

(a)

An Automobile Insurance Company computes the premiums for a motor vehicle (INR 3 lakhs) on the following basis [rates are typically per thousand of sum insured unless otherwise specified. The rating parameters are the (i) age of the vehicle, and (ii) age of the driver]:

(A)	The rates for the age of the vehicle are as follows:
	If age of vehicle < 5 years, then rate is 0.5
	If age of vehicle > 5 years, then rate is 0.8

Premium I =

0.5

1000

×300000 = Rs. 150

(B)	The rates of the age of the driver are as follows:
	For driver age 30 years, rate is 7.5/1000
	For driver age 35 years, rate is 7.9/1000
	So the premium for a vehicle with ages less than 5 years and the age of driver is 35, can be calculated as:

Premium I =

0.5

1000

×300000 = Rs. 150

Premium I =

7.9

3000

×300000 = Rs. 2,370

Total Premium = Premium I + Premium II = Rs. (150 + 2,370) = Rs. 2,520

Based on the above details, briefly answer to the following issues:

(i)	What are the variables considered for computation of premium?

(ii)	Tariff rates as indicated by the insurance company vary with the age of vehicle and the age of driver. Why?

(3+5)+
3+4

(0)

(b)

Define Enterprise Risk Management.

(0)

(c)

What are the performance related measures for risk management?

(0)

Write short notes on the following:

5x3

(a)

CAPM

(0)

(b)

Impact of macro economic factors and risk

(0)

(c)

Re–insurance

(0)

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