P4 Advanced Financial Management

P4 Advanced Financial Management (KAPLAN)

• The examiner has expressed his desire to move the paper away from the highly technical papers set by the previous examiner and to make them more strategic and practical. This has been a feature of the last 2 exam papers in December 2010 and June 2011.

• At the March 2011 ACCA Lecturers’ Conference, the examiner explained that question spotting is dangerous at this level – it is important that students should study all parts of the syllabus in detail.

• However, for December 2011, we would advise students to focus on the following core syllabus topics in particular:

• Net Present Value – including foreign currency cash flows

• Bond yields and bond values

• Risk adjusted WACC

• Discussion of financing options

• Interest rate hedging – options, futures and FRAs


P4 Advanced Financial Management (BPP)


Role and responsibility towards stakeholders:
Ethical issues continue to appear regularly as an optional discussion question, normally with practical financial issues from elsewhere in the syllabus. The discussion question is normally one of the easier optional questions.
Economic value added and ratio analysis can also be used to appraise the performance of a company.
Advanced investment appraisal:
The compulsory question often features an NPV question with an analysis of risk and/or financing; it could easily be set in the context of an overseas investment.
Cost of capital calculations are regularly tested, make sure that you are comfortable adjusting betas for differences in gearing. Real options are also a popular theme.
Acquisitions and mergers:
This exam normally contains a question involving valuations which the examiner sees as a crucial part of the syllabus; valuations questions are also likely to cover strategic and financing issues.
Corporate reconstruction:
A question could also ask you to evaluate a management buy out i.e. whether a business will be worth more if it splits itself up.
Advanced risk management:
We would expect to see a numerical risk management question featuring either interest rate or exchange rate hedging; currency hedging was tested in June 2011.

P4 Advanced Financial Management (ICOUNT)


· Overseas Net Present Value
· Financing incorporating change in Business Risk
· Black Scholes
· Corporate failure
· Interest rate risk management


P4 Advanced Financial Management (FIRST INTUITION)

Q1 International investment appraisal techniques focusing on risk management tools such as value at risk
Q2 Impact of WACC following hedging of interest rate risk
Q3 Company valuation-based scenario, possible MBO finance structure
Q4 Adjusted present value with link to real options and Black Scholes option pricing model
Q5 Written question on credit ratings and difficulties of raising debt finance in current credit markets. This could be linked to current challenges faced by Eurozone governments attempting to raise debt capital amidst falling credit ratings