p4 advanced financial management

WARNING:The examiners deliberately try to avoid question spotting. Use the tips as areas to have a good look at, but remember that no-one knows what’s in the exam except the examiner. Your safest bet is to achieve good syllabus coverage in your revision, as the examiner aims to do in the exam.

BPP Tips:

o Advanced investment appraisal - the basics are now tested in paper F9 so a question will include a twist e.g. use of adjusted present value, overseas aspects (a typical question from the April 2007 BPP study text is question 11) or the recognition and valuation of real options or value at risk.
o Acquisitions & mergers - questions in this area will expect candidates to be competent at the basic valuation techniques (a typical question from the April 2007 BPP study text is question 15) and an ability to discuss the practical aspects such as strategic factors and financing issues.
o Corporate reconstruction & reorganisation - the ability to predict corporate failure using Z scores (a typical question from the April 2007 BPP study text is question 22) and to analyse a financial reconstruction (a typical question from the April 2007 BPP study text is question 23)
o Treasury and advanced risk management techniques - expect a question on currency hedging (a typical question from the April 2007 BPP study text is question 27), interest rate hedging (a typical question from the April 2007 BPP study text is question 32) or the analysis of credit risk to establish the cost of debt finance (a typical question from the April 2007 BPP study text is question 34).

Other areas that we will expect to see, particularly in the optional part of the paper are:

o Role and responsibility towards stakeholders - one of the optional questions will focus on the managerial or ethical dimensions of the finance managers job (a typical question from the April 2007 BPP study text is question 3)
o Economic environment for multinationals - an awareness of the mechanics of raising finance on the global capital markets and of the importance of dividend policy and transfer pricing policy for multinationals (a typical question from the April 2007 BPP study text is question 35)
o Emerging issues - it is important to be able to use a variety of new techniques: a key model is the Black-Scholes option pricing model which can be used to value interest rate options, currency options, real options, and share options (a typical question from the April 2007 BPP study text is question 10).’