Advanced Financial Management ACCA syllabus

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1 Valuation of shares using PE ratio and using the dividend growth model (including using betas and using asset beta formula)
2 Investment appraisal – replacement and/or capital rationing and/or lease v buy
3 Receivables management (whether or not to offer discounts)
4 Part a) Rights issue and effect on some financial ratios
Part b) Foreign exchange risk management

Important areas to cover:
WACC: – any element of the WACC could be tested, including cost of equity, preference shares & different types of debt, along with their corresponding market values & then putting all of this together to calculate the WACC.
Investment decisions: the exam normally contains a question involving net present value (NPV), often with tax and inflation. In order to discount the NPV, you may be asked to first calculate a weighted average cost of capital (see above)
Working capital: questions on inventory management and receivables management are likely. Ensure that you are comfortable with working capital ratios as you may have to be able to put these in reverse
Sources of finance: a topical area, we would expect a part question on financing problems covering gearing issues and problems companies. Ratio analysis is likely to feature here with discussion of the numbers calculated. Ensure you are comfortable with the calculations of the different sources of finance. Islamic Finance was new on the syllabus for the June 11 exam but was not tested. It is possible it may come up in Dec 11, though if it does, it should be straightforward knowledge for a few marks only.
Business Valuations: commonly tested and a core syllabus area. The examiner often combines different syllabus areas within the same exam question – for example asking you to calculate a cost of equity and then use it to value a company.
Kaplan tips
Investment appraisal
The most common technique assessed is NPV with inflation and taxation although be prepared for a twist.
Working Capital Management
It’s been a while since we’ve seen the more numerical aspects surrounding receivables management or the models for cash management.
Risk Management
Foreign exchange risk has been examined more often than interest rate risk. However, both are fairly under-examined areas of the syllabus as a whole and so this is a topic worth being on top of.
First Intuition
Discussion of the economic environment and the impact on interest and exchange rates

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