APM*** P5 December 2012 Exam *** Instant Poll and comments***

the paper is ok but i did not success in managing all the questions well. but do hope for a pass to complete the exam! exam is too long for me! :(

i got 18. some thing EVA positive n Roce 5.8

paper was too time consuming...not any specific model tested...
i wish if i could pass :(

Overall it was a really time pressured exam! But I guess that's to be expected at this level.
A bit disappointed there were no models, I learnt them inside out as tutors suggested.
Hoping for a pass!

I got 8.46% for the WACC, and a positive EVA of $0.2Mill.

ROCE was around 5.98% (using Regulated operating profit of $46m divided by the average capital employed calc'd by the regulator for the year which was around $770m).

took too much time on Q1 and could not complete it at all ! ,,, thought I will fail it again, time management is a big problem !

Really time pressured!!

Q1 I panicked for a while - so much data! Ended up with a report format, and a heading for each division following by subheadings for just Profitability under each. Wrote about the third division having poor credit control with high receivabled which was inflating profits, write down of assets likely and also the inflated effect on the current ratio.

Q1 part B, never touched on the net income bit - wrote about alternative measures being both ROI and RI and spoke about measuring controllable profits and costs. Part c) remuneration - not sure how i done in that - it's subjective isn't it...

Q2) My EVA came out at negative 4.25 or close to that. I went onto explain the current set up was not adding value and costs needed to be cut to get into an acceptable EVA situation. Part :) constraints were no motivation to seek efficiencies to reduce costs otherwise regulatory level would be breached. Only way around this would be increasing total assets, lowering liabilities. Suggestion to measure divisions independantly and to focus regulatory section on qualitative measures.

Q3) The 2 divisions, I said should be zero based, so they could be motivated and focus on increasing margins and cutting costs as no growth likely for these 2 divisions. Third division which was the star, i mentioned beyond budgeting as an option but then seen in the next requirement about rolling budgets so that was a giveaway, explained that. Marketing division i suggested activity based budgeting.

Rolling budget was easy I hope... 3% increase for revenue, 55% for COS and 9% for the other variable cost.

Spoke briefly about beyond budgeting in the 4th requirement as running out of time, never got anything for the improvements to marketing technique.

Final question, was Q4... no time!!! had to miss the main bit and answer about argenti and its lack of external view.

I don't feel confident about this paper at all :(

Very time consuming paper. For the first time ever I have run out of time. Gutted about the whole exam. I have study so hard about models and RI and ROI etc and
all calcs were done, which I thought was unfair (easy marks) compared to the last few exams where students had a chance to show off.
Anyway, good luck to everyone.

What are we supposed to do with BDP in EVA question?

Good luck to everyone! Don't think that you didn't do so well in the paper - in the previous June 2012 sitting, I thought the paper was disastrous to me but at the end I received a mark I'm happy with. Keep the optimism alive. :)

how did people tackle the figures in the rolling budget?

Exam was ok just a bit unusual because there were no models asked for and couldnt immediately apply knowledge without models. I think we all need to be more open minded in our approach to issues. All i am asking for is 50 no more-no less.

hey people! what did you recommend as performance measures for each of the divisions in Q1 part b)? Because they asked for different measures for each division, but I couldn't analyse what is going on in the divisions. Q1 a) and b) were a mess for me! So much data and I still don't know what the examiner wanted us to conclude in these two parts. Anyone has an idea?

My WACC also was 8,46% as someone mentioned before. EVA was also positive, and ROCE 5,99 or 5,98% so it failed the requirements. Then I calculated ROCE from the published FS figures and with them it met the requirements. So I concluded that these figures can be manipulated etc, that's why the regulator wants a special measurement for the assets.

For me Q2, Q3, Q4 were okay.
I expected corporate failure, HR management (remuneration) and BUDGETING, and quality.
3 out of 4 came up in fact :)

I used the z score instead of argenti. Is that wrong?

Rolling budget was very easy. Everybody thought it's something special but it were easy marks :)
Just multiplied revenue by 1,03, fix costs remained the same, CoS and Distribution as someone mentioned 55% and 9% of revenue.

Thats's it!

inflate sales by 3%... cost of sales was 55% of Sales. Distribution was 9% of Sales. Admin remained the same.

Anyway here was my take on the exam

Q1 Horrible. Stupidly long question and as everything was calculated already i realised i how little i know about measures themselves! I fudged it basically. I suggested ROI, EVA and Payable days as other measures. Saying ROI is comparable to other offices, EVA will remove the inefficiencies of RI and concentrates on shareholder value and payable days would be useful to match against receivable days and cashflow.

Q2... was ok. struggled on the marketing bit, but i said taking last years budget is bad and so they need to evaluate their strategic position by use of ansoff and then forecast sales demands and the marketing needed to acheive it. Basically i was talking pants...

Q3 ... EVA got a positive eva of about 10m. couldnt really say much except it will enhance shareholder value... lol. ROCE got about 5.9% so they were ok, but then said its subjective if you take the book value of capital employed which was 7%. then woffled on about how they are holding back growth of the company and that capital employed will increase when assets depreciate.

Q4. just calculated current ratio and gearing, and few profitability ratios and said one division is doing poor, divest. other concentrate on. Agenti, i just listed their weaknesses. too many staff, not owning property, growing too fast, poor ceo, poor management and said it will cause corporate failure.

Q5. Did'nt even bother reading it, saw the requirement and thought havent got clue!

Anyway hope to get a pass. it was a tough exam! The hardest one ive sat to date.

yes, because he asked for QUALITATIVE model

Chap85 how did u calculate current ratio and gearing? I didn't think there was enough no to calculate it or did I miss some info?

Uuuuurgh in the question about the water company....

I took at it as meaning the ROCE couldn't go above 6% for some reason!!! aaaargh! Why would I think that. I went on to explain how cutting costs would mean they would breach the 6%... I assumed it was because it was not supposed to be some massive profit making venture seen as it was regarding the country's water supply... AAARGH

My ROCE was also 6% or 5.98 % . I rounded it off to 6 %. It means the company will not be penalised as the Roce was less then 6 % . If Roce would have been greater than 6 % regulator rate then we would have been penalised.

I thought if the roce is less than 6 percent then there's are penalties!

@ najma you are wrong . IT was clear in the question that the regulator did not want SS company to maintain monopoly therefore the regulator did not want the ROCE to exceed 6%.

Ahhh thank god.. I initially thought that they had failed because they didnt go above 6.. But then I realized it was the other way around so scribbled off everything and changed my answer! Pheww.. relieved to hear I did something right! I got a positive EVA though.. It seems half the students who answered this question got positive EVA and the other half got negative! I wonder which is right.. It was slightly confusing I thought with the different ROCE's that were given.. which to take!! LOL

can anyone remember what the theory was in Q5 was in Baron and Sachs? I've never heard of it before

yes it is less than 6%. they could not form a monopoly.

i think you could calculate current ratio and gearing? it was all in the appendix ready to calcucate. Anyway it's over now, we will get results on 8th Feb so not long to wait. best enjoy our xmas now and forget about it. if we fail the exam next time will be better as we will only have one big scenario to worry about instead of two! I think that is why they are changing it. too much time pressure, it is impossible to absorb the scenario's. i literally skim read them and still just managed to finish!

Q5 was a little mean. sorry examiner... but it was. be interested where in the kaplan book it mentions that.

Omg I must have missed the appendix no wonder I couldn't calculate anything. Was the appendix after the questions? Think a fail is looking likely for me.

Are they changing the exam style o just 1 scenario then?

I think there was an article on Baron & Sachs in Student Accountant, I know I read about it somewhere. Q5b was two perspectives of Balanced Scorecard so I talked about that.

I got a negative EVA in Q3 and 5.9 ROCE.

I did the rolling budget same as others here with the 1.3 increase etc, and then suggested zero based budget.

I thought Q1 was hard but basically went through each division talking about performance individually. Said that under EVA different dept was better performing than originally indicated under Net Income and why. Can't remember which was which now.

@hgreatorex said:
Are they changing the exam style o just 1 scenario then?

It was just after the first question

Disaster for me.

I lost total 8 marks in rolling budgeting.
I am asked to suggest a budget method for marketing division. However, I sugget introduce transfer pricing policy among four divisions. And beyond budget method to adapt to market fluactuation.

I only did a lot of calculations on profitability, gearing, and liquidity, but comment very shortly. I am not sure whether marks can be given to these calculations.

Even worse, in EVA calculation. I only calculated for year 2012. Have you calculated for 2011 too?

At last, I should say THANK YOU to John and angry***and our group. I have attended many classes in P5, but I should say John gives the best lecture. You will find that on condition that you studied his F5 lecture.

one of the easy and unexpected paper from this examiner in terms of division b/w numbers ans theory. every one was expecting more theory but this time totally opposite. it wa nice but to be honest v v v lengthy paper. difficult to cop up with in time.