easy but not straightforward

Vignette: Leigh Marlborough, CFA, is a Senior Credit Underwriter of BNS Bank. She is currently in the midst of preparing the annual credit reviews for several of the bank’s clients. She is also training an intern with the firm on the basic methodologies and theories behind quality credit practices. Question: Leigh looks closely at the quality of management and their ability to execute the business strategy. Which of the following is not a factor in assessing management ability? a) Public versus a private corporate structure b) Financial philosophy and track record c) Accounting conservatism and control d) The strategy of the firm and succession plan


Since it’s not straight forward - D Management’s ability is not contingent on the firm’s strategy, but their ability to execute the strategy? Succession plan has nothing to do with ability.

i second elparko’s motion

I was also with D, but unfortunately the answer was A :-(.

damm… I was 100% sure on the ans being ‘A’ but your subject line scared me to death and was totally concentrating on B, C and D (eliminated A rightaway …lol) which I found none of them to be correct and got back to bed.

I hate you.

Well, the subject line depicted my instinct when I read the question. Somehow, I can’t imagine straightforward questions, I know many of us have the same intution. We always think that there might be a trap in the question :-(. Also, most of the exams I have had experience with (like JEE, NTSE, olympiads etc., Dinesh you might be aware of) have those traps embedded in them. Sorry for misleading with the subject line!!!

Yeah, completely agree. It sometimes feels like you can almost justify any answer (see above), but I guess it’s best to go with your first thought and move on to the next question.

Those are all very nasty exams - Gaurav. The most ridiculous being the CAT, where the whole of India dies for IIM-A/B/C/L/K and even a person scoring a 99.989 percentile can’t make it there … lol hilarious!

Agree with you Dinesh, had tried CAT last year (my final year of graduation from IITK), was unfortunate with english; after that switched to CFA. However, I somehow feel that after a good work experience its better to do MBA from the global top 20 B-schools because the very fact that IIMs take 50-60% freshers is not convincing. I somehow feel that its better to hunt for better opportunities after a meaningful work experience. You are going to have an upper edge over freshers in IIMs after a good work experience, but in other top B-schools you can interact with a more professionally matured crowd. Also, MBA is a lot about contacts, so its better to go to a place where you can earn more elite contacts. Note- The intend is not to write something about CAT. Its a very competitive exam and anyone from a top B-school is offcourse very competitive. Its just an opinion.

The unfortunate part is that they are nowhere listed in the global list of B-schools. Only ISB-Hyderabad makes it way to top-20 I guess in the FT list. I would be trying top-20 univ’s only for my MBA-Fin (queued 3 yrs down the line). Next would be to bash up GMAT.

My plans resemble yours :-)…

did not think it was easy or straightforward!

I think it was fairly obviously A because private/public structures can vary for all sorts of reasons other than management ability. Which study session does this come from?

This is from Allen Resources Website. They had posted free questions for level II. My confusion was that a lot of disclosures and regulations apply specifically to public firms (which are listed). So I thought it might lead to some financial disclosure conflicts and non-standard management selection etc. This led me to think that A might not be the best option. Also, I thought succession plan is not a very important factor, though strategy is. However, after digging a bit, I beleive D is more important and has more wright than A. So A has least importance.

But what makes you guys think Allen Resources’s answer is correct? Remember, for the purpose of the CFA exam, there are 2 types of answers: the wrong answer and the CFA-correct answer. You need to find the “exact” words in the CFA readings to confirm. “A” did pop up in my mind as the correct answer when I first read the question. However, the question is not well-worded. It is asking the management’s “ability…”, which one would infer it as the “ability to execute business strategy”, so “D” is not an important factor either, because “D” is refering to coming up with the strategy, not excuting the strategy. Succession plan is important in accessing the “quality” of the management. In the exam, I would have picked “A” after reading the question, and moved on to the next question quickly without digging deep into it, because the “tone” of the question has been accessing the “quality” of the management, even thought the exact wording is the “ability to execute.” In my experience, doing more practices with questions from various sources may not help. Sticking with the CFA reading may be the best. Just my two cents worth. 3weeks, CFA

Whats the answer