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P R A C T I C

FINANCIAL MANAGEMENT (FM)

E

&

R E V BPP Learning Media is an ACCA Approved Content Provider for the ACCA qualification. This means we work closely with ACCA to ensure our products fully prepare you for your ACCA exams.

I S

In this Practice & Revision Kit, which has been reviewed by the ACCA examining team, we:



Discuss the best strategies for revising and taking your ACCA exams



Ensure you are well prepared for your exam



Provide you with lots of great guida uidance nce on tackling questions



Provide you with three mock exams



answers s as well as our own for selected questions Provide ACCA exam answer

Our Passcards also support the Financial Management syllabus.

I O N

K I T

FOR EXAMS IN SEPTEMBER 2019, DECEMBER 2019, MARCH 2020 AND JUNE 2020

First edition 2008

A note about copyright

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The contents of this book are intended as a guide and not professional advice. Although every effort has been made to ensure that the contents of this book are correct at the time of going to press, BPP Learning Media makes no warranty that the information in this book is accurate or complete and accept no liability for any loss or damage suffered by any person acting or refraining from acting as a result of the material in this book.

We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions. The suggested solutions in the Practice & Revision Kit have been prepared by BPP Learning Media Ltd, except where otherwise stated.

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ii

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About this Practice & Revision Kit From exams in June 2019 it will only be possible for candidates to sit Applied Skills exams as a computer-based exam (CBE). Paper exams will not be run in parallel.

This Practice & Revision Kit is valid for exams from the September 2019 sitting through to the June 2020 sitting and includes both CBE style OTQ banks and CBE style OTQ case questions which are found in the CBE exam. More information on the CBE question types will be available on the ACCA website and on page (xiv).

The syllabus is assessed by a computer-based exam (CBE) format. With effect from June 2019 for TX and September 2019 for all Applied Skills exams, seeded questions have been removed from CBE exams and the exam duration is 3 hours for 100 marks. Prior to the start of each exam there will be time allocated for students to be informed of the exam instructions.

These materials are reviewed by the ACCA examining team. The objective of the review is to ensure that the material properly covers the syllabus and study guide outcomes, used by the examining team in setting the exams, in the appropriate breadth and depth. The review does not ensure that every eventuality, combination or application of examinable topics is addressed by the ACCA Approved Content. Nor does the review comprise a detailed technical check of the content as the Approved Content Provider has its own quality assurance processes in place in this respect.

About this Practice & Revision Kit

iii

Contents Page

Finding questions Question index .................................................................................................................................................................. v Topic index.....................................................................................................................................................................viii

Helping you with your revision ......................................................................................................................ix

Revising Financial Management Topics to revise ................................................................................................................................................................. x Question practice...............................................................................................................................................................x Passing the FM exam ....................................................................................................................................................... xi Exam formulae................................................................................................................................................................ xiv Exam information .......................................................................................................................................................... xvii Useful websites ........................................................................................................................................................... xviii

Questions and answers Questions ..........................................................................................................................................................................3 Answers.........................................................................................................................................................................109

Exam practice Mock exam 1 (September 2016 exam)

 

Questions.............................................................................................................................................................239 Answers ...............................................................................................................................................................252

Mock exam 2 (Specimen exam)

 

Questions.............................................................................................................................................................263 Answers ...............................................................................................................................................................275

Mock exam 3 (December 2016 exam)

 

Questions.............................................................................................................................................................285 Answers ...............................................................................................................................................................297

Mathematical tables and formulae ............................................................................................................309 Review form

iv

Contents

Question index The headings in this checklist/index indicate the main topics of questions, but questions often cover several different topics.

Time

Page number

allocation Marks

Mins

Question

Answer

10

18

3

109

20

36

5

110

10

18

7

111

21–25 OTQ bank 1 – Financial management environment

10

18

9

113

26–30 OTQ bank 2 – Financial management environment

10

18

11

114

31–35 OTQ bank 3 – Financial management environment

10

18

12

114

36–40 OTQ bank 4 – Financial management environment

10

18

14

115

41–45 OTQ bank – Working capital

10

18

15

116

46–55 OTQ bank – Managing working capital

20

36

17

117

56–60 OTQ bank – Working capital finance

10

18

19

118

61–65 PKA Co (12/07, amended)

10

18

20

119

66–70 Plot Co

10

18

22

120

71–75 Gorwa Co (12/08, amended)

10

18

23

121

76–80 Cat Co

10

18

24

122

81 APX Co (12/09, amended)

20

36

25

123

82 Pangli Co (Mar/Jun 17)

20

36

26

125

83 WQZ Co (12/10, amended)

20

36

27

128

84 Oscar Co (Sep/Dec 18)

20

36

28

130

85 Wobnig Co (6/12, amended)

20

36

29

133

86 KXP Co (12/12, amended)

20

36

30

135

Part A: Financial management function Section A Questions 1–5 OTQ bank 1 – Financial management and financial objectives 6–15 OTQ bank 2 – Financial management and financial objectives Section B Questions 16–20 ABC Co

Part B: Financial management environment Section A Questions

Part C: Working capital management Section A Questions

Section B Questions

Section C Questions

Finding questions

v

87 CSZ Co (6/14, amended)

20

36

31

138

88 Flit Co (12/14, amended)

20

36

32

140

89 Widnor Co (6/15, amended)

20

36

33

143

20

36

34

145

Part D: Investment appraisal Section A Questions 90–99 OTQ bank

– Investment decisions

100–109 OTQ bank

– Investment appraisal using DCF

20

36

36

147

110–119 OTQ bank

– Allowing for tax and inflation

20

36

38

149

120–124 OTQ bank

– Project appraisal and risk

10

18

40

151

125–134 OTQ bank

– Specific investment decisions

20

36

42

152

135–139 Sensitivity analysis

10

18

44

154

140–144 Guilder Co

10

18

46

156

145–149 Trecor Co (Specimen exam 2007, amended)

10

18

48

156

150–154 BRT Co (6/11, amended)

10

18

49

157

155 Melanie Co (Sep/Dec 18)

20

36

51

158

156 Project E (6/14, amended)

20

36

51

160

157 AGD Co (FMC, 12/05, amended)

20

36

52

163

158 Basril Co (FMC, 12/03, amended)

20

36

52

165

159 Degnis Co (Mar/Jun 16, amended)

20

36

53

167

160 Warden Co (12/11, amended)

20

36

54

169

161 Copper Co (Mar/Jun 18)

20

36

54

171

162 Uftin Co (12/14, amended)

20

36

55

173

163 Hraxin Co (6/15, amended)

20

36

56

176

164 Vyxyn Co (Mar/Jun 17)

20

36

57

179

165 Pelta Co (Sep/Dec 17)

20

36

58

182

Section B Questions

Section C Questions

Part E: Business finance Section A Questions 166–170 OTQ bank

– Sources of finance

10

18

59

185

171–175 OTQ bank

– Dividend policy

10

18

60

186

176–185 OTQ bank

– Gearing and capital structure

20

36

62

186

186–195 OTQ bank

– The cost of capital

20

36

65

188

20

36

67

190

10

18

69

193

196–205 OTQ bank – Capital structure Section B Questions 206–210 IML Co

vi

Finding questions

Section C Questions 211 Bar Co (12/11, amended)

20

36

70

193

212 YGV Co (6/10, amended)

20

36

71

196

213 NN Co (12/10, amended)

20

36

72

198

214 AQR Co (6/11, amended)

20

36

73

201

215 BKB Co (12/12, amended)

20

36

73

203

216 Fence Co (6/14, amended)

20

36

74

206

217 Tinep Co (12/14, amended)

20

36

75

208

218 Grenarp Co (6/15, amended)

20

36

75

210

219 Dinla Co (Mar/Jun 16, amended)

20

36

76

213

220 Tufa Co (Sep/Dec 17)

20

39

77

215

221 Tin Co (Mar/Jun 18)

20

39

77

218

Part F: Business valuations Section A Questions 222–231 OTQ bank

– Business valuations

20

36

79

221

232–236 OTQ bank

– Market efficiency

10

18

82

223

237–241 Phobis Co (12/07, amended)

10

18

83

224

242–246 GWW Co

10

18

85

225

247–251 Corhig Co (6/12, amended)

10

18

87

225

252–256 Close Co (12/11, amended)

10

18

88

226

257–261 WAW Co

10

18

90

226

262–266 DFE Co

10

18

92

227

Section B Questions

Part G: Risk management Section A Questions 267–276 OTQ bank

– Foreign currency risk

20

36

93

229

277–281 OTQ bank

– Interest rate risk

10

18

96

231

282–286 Rose Co (6/15, amended)

10

18

98

232

287–291 Edwen (pilot, amended)

10

18

100

233

292–296 Zigto Co (6/12, amended)

10

18

102

234

297–301 PGT Co

10

18

103

235

302–306 TGA Co

10

18

105

235

Section B Questions

Mock exam 1 (September 2016 exam)

Mock exam 2 (Specimen exam exam)

Mock exam 3 (December 2016 exam)

Finding questions

vii

Topic index Listed below are the key Financial Management syllabus topics and the numbers of the questions in this Kit covering those topics. If you need to concentrate your practice and revision on certain topics or if you want to attempt all available...