Question 2b
Examiners Report

Part (b) asked candidates to discuss whether or not the company should dispose of its stake or not. Although not specified in the requirements of the questions, pointers in the question narrative such as the financial statements and industrial ratios and trends indicated that this was a  performance
measurement type question.

Some credit was also given to answers which attempted to value the company, although this probably would not have yielded many relevant answers unless numerous assumptions were made. Good answers for this part, which provided calculations in a tabular format and then discussed the results in a holistic manner gained the majority of the marks.

However, many responses tended to be unstructured, with few calculations to back up what was being said. Some responses also tended to be largely descriptive and piecemeal, where a ratio or trend was calculated and commented on, but the larger picture and discussion were missed.

A similar question to this one was asked in a recent examination. Unfortunately, the same comment was made then and is repeated now.. It is important that question practice to prepare for the exam is done strategically to learn how to approach various types of P4 questions.

A surprising number of responses made errors in calculating the ratios and/or only gave ratios for one or two years. At this level, such an approach will not gain many marks. It is also difficult to discuss the key findings in any meaningful manner without examining a trend, but this cannot be done from examining one or two years’ data.

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