However, following are the Exam Tips (Important Topics) of ACCA f9 for December 2014 attempt that may appear in exams according to expert tutors and tuition providers.
– Investment appraisal
NPV with inflation and taxation/IRR has not been tested for over three years so may pop up. – Working Capital Management
Cash operating cycle and receivables management/payables management or inventory management/funding strategies is a key discursive element– Valuations
PE ratio and dividend valuation methods/Cash flow based values/efficient market hypothesis – Business Finance
The impact of financing on ratios/the impact that different policies may have on a company/being able to both calculate and interpret financial ratios/sources of finance.– Cost of Capital
CAPM formula and calculating WACC and impact of the cost of capital on investments. Gearing theories.
– Risk Management
Foreign Exchange Risk / Interest Rate Risk
– The Financial Management Function and Environment
– Investment appraisal: NPV of a project with inflation and tax.
– Working capital management: managing accounts receivable, accounts payable, inventory levels, cash.
– Business valuation: IRR, ROCE, and Payback.
– WACC calculations.
– Foreign exchange risk management.
– Sources of long-term finance.
– Effects of a rights issue bonus issue etc
– Investment appraisals: calculation of NPV. Discussion question on risk and uncertainty – example – sensitivity analysis and probability distribution.
– Working capital management: Quantity discount (EOQ) or factoring calculations . Discussion of working capital financing and/or investment policies.
– Cost of capital: WACC: calculating cost of equity using CAPM or dividend valuation model, cost of redeemable debt and bank loan/preference shares. Discussion of circumstances under which WACC can be used.
– Business valuation: Valuation of equity using; DVM, P/E ratio and asset basis. Explanation of weak/semi-strong and strong form of efficient market.
– Sources of finance: The effect of different financing options on key ratios like EPS, debt/equity ratio and interest cover, including calculation of TERP. Discussion of factors to consider in raising short/long-term capital or equity/debt capital.
– Risk management: Hedging currency risk using forward contract and money market hedge. Using purchasing power parity and interest rate parity theories to estimate future spot rate and forward rate respectively.
– Dividend policy: Factors to consider in formulating dividend policy or the effect of a change in dividend policy on share price.
– Discussion of the economic environment and the impact on interest and exchange rates.
– Working capital management.
– Investment appraisal & cost of capital.
– Business valuations.
Section A: 20 MCQ’s from any area of syllabus
- Receivable Management
- NPV with tax and inflation
- Foreign exchange risk management
- WACC calculation including CAPM
- Gearing – Both operational and financial
– Read the examiner’s articles – Capital Asset Pricing Model ([arts 1-3). Also take a look at recent Myopic management feature.
– Read other key articles – Business Valuation (Feb 2012), Advanced investment appraisal (Oct 2010), Foreign exchange risk and its management (July 2010).
– Debt factoring.
– Dividend policy.
– Bond valuation (including convertibles).
– Practice as many multiple choice questions as you can before the exam, these will likely be more tricky than you think and will comprise 40% of your overall mark.
– We know that the two 15 mark questions will cover working capital management, investment appraisal and business finance. Make sure you can calculate an NPV under inflation and taxation. You will also need to be familiar with all working capital models e.g. EOQ, Miller-Orr etc and be able to calculate the least cost options.
– The three 10 mark questions will cover key topics such as business valuations, cost of capital (WACC) and risk management (Interest and Forex).