ACCA AFM study guide
ACCA AFM · Work through your exam, one topic at a time.
ACCA Advanced Financial Management (AFM) is the strategic-level optional exam for candidates who want to specialise in corporate finance and treasury work. It suits finance professionals who already have a grounding in financial management and now need to advise at board level. The ACCA AFM study guide has 5 sections and about 1,574 words.
01The Financial Management Environment and the Role of the Senior Financial Adviser
The senior financial adviser sits at the junction of strategy, capital markets and stakeholder expectations. Candidates should be fluent in: the objectives of the firm (shareholder wealth maximisation versus stakeholder claims); agency theory and how it shapes governance, remuneration and monitoring; the efficient market hypothesis in its weak, semi-strong and strong forms and what each implies about information disclosure; and the regulatory and legal environment (listing rules, disclosure obligations, insider dealing).
323 words, about 2 min02Investment Appraisal and Valuation
Core tools: discounted cash flow using a project-specific cost of capital, NPV as the primary decision rule, IRR with its reinvestment assumption, payback and discounted payback, and the treatment of inflation (real versus money terms - never mix them). You must handle tax (capital allowances, tax-allowable depreciation), working capital, opportunity costs and sunk costs correctly.
322 words, about 2 min03Risk Management
Distinguish transaction, translation and economic exposure to exchange rates, and the tools for each: forward contracts, money market hedges, currency futures, options and swaps. Know interest rate risk tools: forward rate agreements, interest rate futures, options on futures and swaps, and be able to compute a hedge using the appropriate tick value and basis.
337 words, about 2 min04Corporate Restructuring and Reorganisation
Restructuring covers acquisitions, mergers, divestments, management buy-outs and buy-ins, demergers and spin-offs, and financial reconstruction. You must be able to value synergies, assess the gain and loss to acquirer and target shareholders, and evaluate the form of consideration (cash versus shares).
299 words, about 1 min05Financing Decisions and Cost of Capital
You must compute the weighted average cost of capital, the cost of equity via CAPM and the dividend growth model, the cost of debt (including irredeemable and redeemable debt, and after-tax effects), and understand gearing - book versus market, and the impact of tax. Know the traditional and Modigliani–Miller views (with and without tax), the trade-off with financial distress costs, and the pecking order.
293 words, about 1 min