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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 Maximum Marks 90

(i) Attempt all questions.

(ii) Answers must be neat, relevant and brief.

(iii) 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.

(iv) Read the instructions printed on the top cover of answer script CAREFULLY before attempting the paper.

(v) Use of non-programmable scientific calculators of any model is allowed.

(vi) DO NOT write your Name, Reg. No. or Roll No. anywhere inside the answer script.

(vii) 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 takeadvantages of opportunities and avoid or reduce the impact of threats. Competitiveanalysis is imperative for anticipating external threats. Collecting and evaluatinginformation on competitors is essential for successful strategy formulation. One of thewidely used approaches for competitive analysis is Porters Five-Forces Model.Illustrate and describe Porters Five Forces Model of Competition. 17

(b) Briefly touch upon three steps for using Porter s Five Forces Model. 03

Q. 3 (a) Strategists never consider all feasible alternatives that could benefit the firm becausethere are an infinite number of possible actions and an infinite number of ways toimplement 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 strategicformulation techniques can be integrated into a three-stage decision makingframework namely the Input Stage, Matching Stage and the Decision Stage. Inmatching stage organizations try to match its internal resources and skills with theopportunities and risks created by its external factors. Among the techniques ofmatching stage BCG Matrix has long been used by various organizations. Illustrateand describe in detail the Boston Consulting Group (BCG) Matrix. 16

(b) Discuss the dimensions of culture while making strategic choices. 04

Q. 4 (a) Define strategies. 01

(b) Firms do require intensive efforts if its competitive position with existing products orservices is to improve. Identify and discuss three types of intensive strategies. 09

Q. 5 (a) Changes in strategy often require changes in the way an organization is structured fortwo major reasons. First, structure largely dictates how objectives and policies will beestablished. The second major reason is that structure dictates how resources will beallocated. Elaborate three broad types of organizational structures in the context ofimplementing the strategy. 12

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(b) No organization or individual can escape change. The strategic managementprocess itself can impose major changes on individuals and processes. How can amanager manage resistance to change during implementation stage? 04

(c) A basic premise of good strategic management is that firms plan ways to deal withunfavourable and favourable events before they occur. Strategists cannot and shouldnot 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 fourcontingency plans usually followed by organizations. 04

Q. 6 Consider the following balance sheet and selected data from income statement of acompany.

Balance Sheet Rs. 000

June 30Assets: 2010 2009

Cash 4,500 3,000Marketable securities 5,400 3,600Accounts receivable 6,000 5,400Inventories 8,700 8,400

Total current assets 24,600 20,400Gross fixed assets 88,500 84,300Less: Accumulated depreciation 44,100 39,300

Net fixed assets 44,400 45,000Total assets 69,000 65,400

Liabilities & shareholders equity:Accounts payable 4,800 4,500Notes payable 8,400 6,600Accrued 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 8,400Total shareholders equity 40,200 38,400Total liabilities & shareholders equity 69,000 65,400

Data from Income statement (2010):Depreciation expenses 34,800

EBIT 8,100

Taxes 2,799

Net profit after tax 4,200

Required:(a) Calculate the firms:

(i) Accounting cash flow.

(ii) Operating cash flow.

(iii) Firms free cash flow.

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(b) Interpret, compare and contrast your cash flow estimates at (i), (ii) & (iii) above. 03

(c) Analysis of projected financial statements allows an organization to examine theexpected results of various actions and approaches. How does financial manager fulfillthis objective while carrying out the evaluation of pro forma statements? 04

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