F9 Financial Management

According to BPP following are the topics that are expected to appear in F9 Financial Management for June 2008 attempt. WARNING: The examiners deliberately try to avoid question spotting. Use the tips as areas to have a good look at, but remember that no-one knows what’s in the exam except the examiner. Your safest bet is to achieve good syllabus coverage in your revision, as the examiner aims to do in the exam. All questions in this exam are compulsory, and all areas of the syllabus are of equal importance.  Within each area of the syllabus the themes that we would expect to see most regularly in the exam are:

l        Financial management function – questions are likely to test understanding of objectives and will use ratio analysis to test the candidate’s ability to evaluate business performance.

l        Financial management environment– this area is most likely to be tested as a part of an exam question; questions are likely to require an understanding of the practical implications of government economic policy or the practical importance of key financial markets such as the stock market (a typical question from the April 2007 BPP study text is question 2a).

l        Working capital management – questions are likely to test candidates’ understanding of practical issues in the management of more than one type element of working capital with a requirement to evaluate a proposed change in working capital management (a typical question from the April 2007 BPP study text is question 6).

l        Investment appraisal – questions in this area will expect candidates to be competent at the basic techniques for evaluating the return on a project (NPV, IRR, ROCE) and the risk of a project (payback, adjusted payback and sensitivity analysis). A typical question from the April 2007 BPP study text is question 12.

l        Business finance – questions are likely to test understanding of the types of short and long-term finance that are available to a business and the appropriate balance between debt and equity. The examiner will often test the test the candidate’s ability to evaluate the effect of a source of finance on the balance sheet of a business using ratio analysis. A typical question from the April 2007 BPP study text is question 20.

l        Cost of capital – this will test the calculation of the weighted average cost of capital (possibly involving more than two types of capital) or a project specific cost of capital. Make sure you can discuss the limitations of the weighted average cost of capital, and the use and limitations of Modigliani and Miller theory. A typical question from the April 2007 BPP study text is question 23.

l        Business valuations – questions will require you to use a number of different valuation techniques to value a company. Discussion areas are likely to include the limitations of the techniques that have been used and the relevance of the efficient markets hypothesis to business valuations (a typical question from the April 2007 BPP study text is question 25).

l        Risk management – this will normally focus on currency hedging (a typical question from the April 2007 BPP study text is question 27).