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Unformatted text preview: lOMoARcPSD|4162152 F9 kit 2018 .pdf · version 1 Financial management (University of Oxford) StuDocu is not sponsored or endorsed by any college or university Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 Professional Examinations Paper F9 Financial Management EXAM KIT Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 P AP E R F 9 : FINAN CIAL MANA GEME NT British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. Published by: Kaplan Publishing UK Unit 2 The Business Centre Molly Millar’s Lane Wokingham Berkshire RG41 2QZ ISBN: 978-1-78415-833-0 © Kaplan Financial Limited, 2017 Printed and bound in Great Britain. The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties. Please consult your appropriate professional adviser as necessary. Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials. All rights reserved. No part of this examination may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without prior permission from Kaplan Publishing. Acknowledgements The past ACCA examination questions are the copyright of the Association of Chartered Certified Accountants. The original answers to the questions from June 1994 onwards were produced by the examiners themselves and have been adapted by Kaplan Publishing. We are grateful to the Chartered Institute of Management Accountants and the Institute of Chartered Accountants in England and Wales for permission to reproduce past examination questions. The answers have been prepared by Kaplan Publishing. P.2 K A P LA N P UB L I S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 CONTENTS Page Index to questions and answers P.5 Analysis of past exam papers P.11 Exam Technique P.13 Paper specific information P.15 Kaplan’s recommended revision approach P.19 Kaplan’s detailed revision plan P.21 Mathematical tables and formulae sheet P.27 Section 1 Objective Test Questions – Section A 1 2 Objective Test Case Study Questions – Section B 43 3 Constructed Response (long) Practice Questions – Section C 85 4 Answers to Objective Test Questions – Section A 153 5 Answers to Objective Test Case Questions – Section B 177 6 Answers to Constructed Response (long) Practice Questions – Section C 203 Specimen Exam 455 P.3 KAPLAN P UBLI S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 P AP E R F 9 : FINAN CIAL MANA GEME NT Key features in this edition In addition to providing a wide ranging bank of real past exam questions, we have also included in this edition: • An analysis of all of the recent examination papers. • Paper specific information and advice on exam technique. • Our recommended approach to make your revision for this particular subject as effective as possible. • This includes step by step guidance on how best to use our Kaplan material (Study text, pocket notes and exam kit) at this stage in your studies. • Enhanced tutorial answers packed with specific key answer tips, technical tutorial notes and exam technique tips from our experienced tutors. • Complementary online resources including full tutor debriefs and question assistance to point you in the right direction when you get stuck. You will find a wealth of other resources to help you with your studies on the following sites: Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to [email protected] with full details, or follow the link to the feedback form in MyKaplan. Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions. P.4 K A P LA N P UB L I S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 INDEX TO QUESTIONS AND ANSWERS INTRODUCTION Following the introduction of the revised exam format, all previous ACCA constructed response (long) exam questions within this kit have been adapted. The specimen paper is included at the end of the kit. KEY TO THE INDEX PAPER ENHANCEMENTS We have added the following enhancements to the answers in this exam kit: Key answer tips All answers include key answer tips to help your understanding of each question. Tutorial note Many answers include more tutorial notes to explain some of the technical points in more detail. Top tutor tips For selected questions, we 'walk through the answer' giving guidance on how to approach the questions with helpful ‘tips from a top tutor’, together with technical tutor notes. These answers are indicated with the 'footsteps' icon in the index. P.5 KAPLAN P UBLI S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 P AP E R F 9 : FINAN CIAL MANA GEME NT ONLINE ENHANCEMENTS Timed question with Online tutor debrief For selected questions, we recommend that they are to be completed in full exam conditions (i.e. properly timed in a closed book environment). In addition to the examiner’s technical answer, enhanced with key answer tips and tutorial notes in this exam kit, online you can find an answer debrief by a top tutor that: • works through the question in full • points out how to approach the question • shows how to ensure that the easy marks are obtained as quickly as possible, and • emphasises how to tackle exam questions and exam technique. These questions are indicated with the 'clock' icon in the index. Online answer debriefs will be available on MyKaplan at: P.6 K A P LA N P UB L I S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 INDEX TO QUES TIO NS AND ANSWE RS Page number Question Answer SECTION A-TYPE QUESTIONS Financial Management Function Financial Management Environment Working Capital Management Investment Appraisal Business Finance and Cost of Capital Business Valuations Risk Management 1 5 10 15 22 30 37 153 155 157 160 165 170 173 43 45 52 60 68 77 177 178 183 188 191 197 SECTION B-TYPE QUESTIONS Financial Management Function and Environment Working Capital Management Investment Appraisal Business Finance and Cost of Capital Business Valuations Risk Management SECTION C-TYPE QUESTIONS FINANCIAL MANAGEMENT FUNCTION AND ENVIRONMENT 1 2 3 4 UUL Co CCC Neighbouring countries RZP Co 85 86 87 87 203 205 208 210 − − − − 5 JJG Co 88 213 June 09 6 News for you 89 217 − WORKING CAPITAL MANAGEMENT 7 8 Gorwa Co FLG Co 90 91 219 223 Dec 08 June 08 9 PKA Co 92 226 Dec 07 10 11 12 KXP Co Ulnad APX Co 93 94 94 231 235 238 Dec 12 − Dec 09 13 HGR Co 96 243 June 09 14 15 Anjo Co ZSE Co 97 98 248 249 − June 10 16 PNP Co 99 254 June 07 17 Plot Co 100 258 Dec 13 18 WQZ Co 101 261 Dec 10 19 Flit Co 102 265 Dec 14 20 Nesud Co 103 270 Sep 16 P.7 K APLAN P UBLI S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 P AP E R F 9 : FINAN CIAL MANA GEME NT Page number Question Answer INVESTMENT APPRAISAL 21 Armcliff Co 103 273 − 22 23 24 25 26 27 Warden Co Dairy Co Investment appraisal Darn Co Charm Inc. Play Co 105 105 106 107 107 108 275 280 282 287 290 293 Dec 11 − − Dec 13 − − 28 Duo Co 109 296 Dec 07 29 30 31 32 33 34 35 36 37 38 OKM Co BRT Co Umunat Co Victory CJ Co Basril ASOP Co Degnis Co Hraxin Co Hebac Co 110 111 112 112 113 114 115 115 116 117 301 306 309 312 314 319 321 325 330 334 June 10 June 11 − − Dec 10 − Dec 09 Jun 16 Jun 15 Sep 16 BUSINESS FINANCE AND COST OF CAPITAL 39 40 41 42 43 FMY Fence Co RWF Bar Co Nugfer 118 119 119 120 122 337 340 343 346 349 − June 14 − Dec 11 Dec 10 44 Spot Co 123 355 Dec 13 45 Echo Co 123 357 Dec 07 46 47 48 49 Zigto Co Pavlon Arwin Associated International Supplies Co 124 125 126 128 362 366 368 370 June 12 − − − 50 AMH Co 129 374 June 13 51 GTK Co 130 378 June 07 52 TFR 131 381 June 07 53 GXG Co 132 383 June 13 54 55 Ill colleague AQR Co 133 134 386 388 − June 11 P.8 K A P LA N P UB L I S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 INDEX TO QUES TIO NS AND ANSWE RS Page number Question 56 57 58 59 Card Co IRQ Co Dinla Co Tinep Co Answer 134 135 136 137 392 394 396 400 Dec 13 − Mar 16 Dec 14 BUSINESS VALUATIONS 60 KFP Co 138 404 June 09 61 Close Co 139 407 Dec 11 62 63 64 65 MFZ Co NN Co Corhig Co MAT Co 140 141 142 143 410 414 418 421 June 14 Dec 10 June 12 − 66 THP Co 144 424 June 08 67 Dartig Co 145 429 Dec 08 68 Phobis 146 432 Dec 07 RISK MANAGEMENT 69 Nedwen 147 436 − 70 Boluje Co 148 438 Dec 08 71 Exporters plc 149 441 − 72 73 74 Elect Co CC Co Plam Co 149 150 151 443 446 449 − − Mar 16 P.9 K APLAN P UBLI S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 P AP E R F 9 : FINAN CIAL MANA GEME NT P.10 K A P LA N P UB L I S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 ANALYSIS OF PAST PAPERS The table below summarises the key topics that have been tested within the written test questions in the examinations to date. A much wider range of topics will now be examined following the introduction of objective test questions. Commencing September 2015, only selected questions will be released by ACCA every six months. The September 2016 paper was, however, released in full. J13 D13 J14 D14 J15 S15/ M16/ D15 S16 J16 Financial management function Nature and purpose of financial management Financial objectives and corporate strategy Stakeholders and their impact on corporate strategy Not for profits Financial management environment Economic environment Financial markets and institutions Working capital management Elements and importance (including cash operating cycle) Overtrading Inventories Receivables Payables Cash Working capital needs and funding strategies Investment appraisal Appraisal process Non-discounted techniques NPV with tax NPV with tax and inflation IRR Lease or buy Risk and uncertainty Asset replacement Capital rationing P.11 KAPLAN P UBLI S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 P AP E R F 9 : FINAN CIAL MANA GEME NT J13 D13 J14 D14 J15 S15/ M16/ D15 S16 J16 Business finance and cost of capital Sources of short term finance Sources of long term finance Internal sources and dividend policy Gearing and capital structure Small & medium enterprises Islamic financing Sources and relative costs Estimating cost of equity CAPM Cost of debt Overall cost of capital Gearing theories Impact of cost of capital on investments Business valuations Nature and purpose of valuation Models for valuing shares Valuing debt and other financial assets Efficient markets hypothesis Risk management Foreign exchange risk Interest rate risk Forward contracts Money market hedge Futures Hedging for interest rate risk P.12 K A P LA N P UB L I S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 EXAM TECHNIQUE GENERAL COMMENTS • We recommend that you spend 15 minutes reading the paper at the beginning of the exam: – read the questions and the examination requirements carefully, and – begin planning your answers. See the Paper Specific Information for advice on how to use this time for this paper. • If 15 minutes are spent reading the examination paper, this leaves three hours to attempt the questions. • Divide the time you spend on questions in proportion to the marks on offer: – one suggestion for this examination is to allocate 1.8 minutes to each mark available (180 minutes/100 marks), so a 20 mark question should be completed in approximately 36 minutes. If you plan to spend more or less time than 15 minutes reading the paper, your time allocation per mark will be different. – within that, try to allow time at the end of each question to review your answer and address any obvious issues. Whatever happens, always keep your eye on the clock and do not over run on any part of any question! • • • If you get completely stuck with a question: – leave space in your answer book, and – return to it later. Stick to the question and tailor your answer to what you are asked. – Pay particular attention to the verbs in the question. – Try to apply your comments to the scenario where possible. If you do not understand what a question is asking, state your assumptions. Even if you do not answer in precisely the way the examiner hoped, you should be given some credit, if your assumptions are reasonable. • You should do everything you can to make things easy for the marker. The marker will find it easier to identify the points you have made if your answers are legible. OBJECTIVE TEST QUESTIONS • Decide whether you want to attempt these at the start of the exam or at the end. • No credit for working will be given in these questions, the answers will either be correct (2 marks) or incorrect (0 marks) • Read the question carefully, as the alternative answer choices will be given based on common mistakes that could be made in attempting the question. • If a question looks particularly difficult or time consuming, then miss it out first time through and come back to it later. P.13 KAPLAN P UBLI S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 P AP E R F 9 : FINAN CIAL MANA GEME NT CONSTRUCTED RESPONSE (LONG) QUESTIONS • Written elements: Your answer should have: – a clear structure – a brief introduction, a main section and a conclusion. Be concise. It is better to write a little about a lot of different points than a great deal about one or two points. Where possible, try to relate comments to the specific context given rather than your answer looking like it was simply copied out of the textbook. • Computations: It is essential to include all your workings in your answers. COMPUTER-BASED EXAMS – ADDITIONAL TIPS • Do not attempt a CBE until you have completed all study material relating to it. • On the ACCA website there is a CBE demonstration. It is ESSENTIAL that you attempt this before your real CBE. You will become familiar with how to move around the CBE screens and the way that questions are formatted, increasing your confidence and speed in the actual exam. • Be sure you understand how to use the software before you start the exam. If in doubt, ask the assessment centre staff to explain it to you. • Questions are displayed on the screen and answers are entered using keyboard and mouse. • In addition to the traditional multiple choice question type, CBEs will also contain other types of questions, such as number entry questions, formulae entry questions, multiple correct answers (select two or more), matching labels to targets, stem questions with multiple parts and written questions requiring text entry. • You need to be sure you know how to answer questions of these types before you sit the exam, through practice. P.14 K A P LA N P UB L I S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 PAPER SPECIFIC INFORMATION THE EXAM FORMAT OF THE EXAM From September 2016, the exam will be in THREE sections, and will be a mix of narrative and computational answers. All questions are compulsory. Number of marks Section A: Fifteen objective test questions of 2 marks each 30 Section B: Three objective test case studies – five questions per case study of 2 marks each 30 Section C: Two constructed response (long) questions, mainly from the syllabus areas of working capital management, investment appraisal and business finance: Question 1 20 Question 2 20 _______ 100 _______ Total time allowed: 3 hours and 15 minutes. Note that: • the F9 paper will have both a discursive and computational element. The objective test questions and the objective test case study questions will therefore include a mix of calculation-based and explanation-based questions. • there is likely to be a discussion element included in the constructed response questions in Section C. PASS MARK The pass mark for all ACCA Qualification examination papers is 50%. SECTION A QUESTIONS Note that in the paper-based exam, all Section A questions will be multiple choice questions. The computer-based exam will include different question styles, as described in the previous section on exam technique. A mixture of these question types is included within this exam kit. P.15 KAPLAN P UBLI S H I N G Downloaded by Kevin Liew ([email protected]) lOMoARcPSD|4162152 P AP E R F 9 : FINAN CIAL MANA GEME NT The CBE will contain 110 marks of exam content; 100 marks contribute to the student result and 10 marks do not. These 10 marks of exam content are referred to as ‘seeded questions’ and will either be one OT case (five OT questions based around a single scenario) or 5 single OTs distributed randomly within the exam. Of the exam duration of 3 hours and 20 minutes, 3 hours relate to the 100 marks of exam content which contribute to the student result and 20 minutes relate to the seeded content. Seeded questions are included in the exam for quality assurance and security purposes and ensure that a student’s mark is fair and reliable. The paper exam does not include seeded content so has 100 marks of exam content that needs to be completed within 3 hours and 15 minutes. In recognition that paper exams do not have any of the time saving efficiencies which can be incorporated in a computer exam, students are allocated more time for the same 100 marks. APPROACH TO THIS PAPER F9 is divided into three different sections, requiring the application of different skills to be successful. Section A Stick to the timing principle of 1.8 minutes per mark. This means that the 15 OT questions in section A (30 marks) should take 54 minutes. Work steadily. Rushing leads to careless mistakes and the OT questions are designed to include answers which result from careless mistakes. If you don’t know the answer, eliminate those options you know are incorrect and see if the answer becomes more obvious. Remember that there is no negative marking for an incorrect answer. After you have eliminated the options that you know to be wrong, if you are still unsure, guess. Section B There is likely to be a significant amount of information to read through for each case. You should begin by reading the OT questions that relate to the case, so that when you read through the information for the first time, you know what it is that you are required to do. Each OT question is worth two marks. Therefore you have 18 minutes (1.8 minutes per mark) to answer the five OT questions relating to each case. It is likely that all of the cases will take the same length of time to answer, although some of the OT questions within a case may be quicker than other OT questions within that same case. Once you have read through the information, you should first answer any of the OT questions that do not require workings and can be quickly answered. You should then attempt the OT questions that require workings utilising the remaining time for that case. All of the tips for section A are equally applicable to each section B question. Section C The constructed response questions in section C will require a written response rather than being OT questions. Therefore, different techniques need to be used to score well. Unless you know exactly how to answer the question, spend some time planning your answer. Stick to the question and tailor your answer to what you are asked. Pay particular attention to the verbs in the question e.g. 'Calculate', 'State', 'Explain'. As stated earlier, if you get completely stuck with a question, leave space in your answer book and ret...
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