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ACCA P4 Advanced Financial Management

LOL Revision � March 2017

Date

Topic

20th Feb

Corporate Reconstruction

22nd Feb

Treasury & Risk Management

27th Feb

Mergers & Acquisitions

1st Mar

Advanced Investment Appraisal

NB: Role of Senior Advisor is infused into questions from above syllabus area
Lecturer: Joel Romaner Email: jromaner@lsbf.org.uk
1.0 Role of Senior Financial Advisor in Multinational
Organisation

1. The role and responsibility of senior financial executive/advisor

2. Financial strategy formulation
3. Ethical and governance issues
4. Management of international trade and finance
5. Strategic business and financial planning for multinationals
6. Dividend policy in multinationals and transfer pricing

Past Exam Papers

Page

Question

Topics Covered

D16 Q1 Morado

Risk management / Cost of Capital / Restructure /

Forecasting
Revision Kit Questions

Page

Question

Topics Covered

20

J13 Q4 LIMNI

Dividend Policy
2.0 Advanced Investment Appraisal

1. Discounted cash flow techniques

. NPV / Single period and multi-period capital rationing / Probability analysis /
sensitivity analysis / Duration / Project value at risk. / MIRR

2. Application of option pricing theory in investment decisions

. Black-Scholes Option Pricing Model / Real Options
3. Impact of financing on investment decisions and adjusted present values
. Sources of finance / assessment on the financial position, risk and value
. Islamic financing
. Cost of capital & appropriateness / Project specific cost of equity
. Impact of interest rate changes using the simple Macaulay duration
. Capital structure theory
. Apply the adjusted present value technique

4. Valuation and the use of free cash flows

. Asset / income / free cash flow based models to value equity.
. Value of corporate debt.
. BSOP model to estimate the value of equity

5. International investment and financing decisions

. Fx rates / double tax treat / blocked remittance / transfer pricing / alternative

sources of finance

Past Exam Papers

Page

Question

Topics Covered

D14 Q3 RIVIERE

EU / Value at Risk / Project Investment

J15 Q1 YILANDWE
International NPV / assumptions & Risks

D15 Q4 � MOONSTAR

Securitisation Finance / Islamic Finance

J16 Q4 Furlion

Black Scholes / Greeks / International Trade

D16 Q2 Fenhurst

NPV / Duration / Sensitivity

Revision Kit Questions

Page

Question

Topics Covered

52

Q44 BURUNG (J14)

APV including degear / Errors in NPV

66

Q55 MILMA (J13)

WACC / Free cash / equity for debt / share issue / ethical

68

Q56 MEGHAM (D13)

WTO / International Investment appraisal / BSOP

3.0 Acquisitions & Mergers

1. Acquisitions and mergers versus other growth strategies

. As a method of corporate expansion.
. Evaluate the corporate and competitive nature of a given acquisition proposal.[3]

. Advise upon the criteria for choosing an appropriate target for acquisition.[3]
. Failure rate of acquisitions in enhancing shareholder value.[3]
. Revenue synergy / Cost synergy / financial synergy.
. Reverse takeover
2. Valuation for acquisitions and mergers
. Problem of overvaluation / Growth in earnings / Value creation
. Risk profile & exposure / valuing high growth start-ups.
3. Regulatory framework and processes
. Regulatory framework for mergers and acquisitions
. Identify the main regulatory issues / Shareholders� best interests / Appropriate
defence�s
4. Financing acquisitions and mergers
. Compare the various sources of financing available
. Recommend the most appropriate offer to be made.
. Impact on the reported financial position and performance

Past Exam Papers

Page

Question

Topics Covered

D14 Q1 NAHARA

Acq strategy / EU / Value creation / Combining companies

D15 Q1 CIGNO

Divestment / Value from Acq / Redundancies / Defence

J16 Q2 Louieed

Acquisition / PE ratios / required funding

D16 Q3 Chithurst

Dividend Policy and Dividend Valuation

Revision Kit Questions

Page

Question

Topics Covered

84

Q66 SIGRA

Acquisition and premium payable

85

Q68 HAV (J13)

Synergy / acq premium

87

Q69 MAKONIS (D13)

Equity value (com asset beta & WACC) / acq premiums / funds

88

Q70 VOGEL (J14)

Acquisition and premium payable

4.0 Corporate Reconstruction & Reorganisation

1. Financial reconstruction
. Determine if appropriate strategy
. Reaction of capital market
. Impact upon the value
2. Business re-organization
. Strategies for unbundling
. Financial and other benefits
. Financial issues relating to a management buy-out and buy-in.

Past Exam Papers

Page

Question

Topics Covered

J15 Q2 CHAWAN

Dark Pool Trading / Disposal of Equity Stake

J15 Q3 BENTO

MBO v MBI / Restrictive Covenants

D15 Q3 � FLUFFTORT

Share repurchase / refinancing

J16 Q3 Staple Group

Divesting / reduction I staff costs

Revision Kit Questions

Page

Question

Topics Covered

51

Q43 COEDEN (D12)

Wacc / Value of equity / Demergers

98

Q80 NUBO (D13)

Disposal / Demerger / Finance

5.0 Treasury & Risk Management Techniques

1. The role of the treasury function in multinationals

. Short term management / longer term maximization of corporate value
. The management of risk exposure.
. Exchange traded versus OTC agreements
. Key features standard contracts / tick sizes / margin requirements / basis risk
. Delta / gamma / vega / rho / theta
2. The use of financial derivatives to hedge against forex risk
. Translation / transaction / economic
. Forward exchange market / money market hedge
. Exchange-traded currency futures options contracts
. Currency swaps / FOREX swaps
. Bilateral and multilateral netting
3. The use of financial derivatives to hedge against interest rate risk
. Forward Rate Agreements (FRAs)
. Interest rate futures & options / collars
. Interest rate swaps

Past Exam Papers

Page

Question

Topics Covered

D14 Q2 KESHI

Int rate hedging / centralized treasury / Islamic finance

J15 Q4 DAIKON

FX Hedging & further issues

D15 Q2 � ARMSTRONG

FX Netting / Interest rate options & collars

J16 Q1 Lirio

PPPT / Div Capacity / FX Hedge / Value / financing

D16 Q4 Pault

Interest Rate swaps

Revision Kit Questions

Page

Question

Topics Covered

108

Q92 LIGNUM (D12)

Fx exposure / forward & options / Impact of fin statements

109

Q93 KENDURI (J13)

Hedging strategy / netting / greeks

111

Q94 CMC (J14)

FX Hedging / Swaps / Duration / treasury / agency issues

122

Q108 AWAN (D13)

Interest rate hedging / Greeks