ACCA FM study guide
ACCA FM · Work through your exam, one topic at a time.
Financial Management (FM) is one of the exams in the ACCA Qualification. ACCA's own study support resource listing places it alongside Business and Technology (BT), Management Accounting (MA), Financial Accounting (FA), Corporate and Business Law (LW), Performance Management (PM), Taxation (TX), Financial Reporting (FR) and Audit and Assurance (AA). The ACCA FM study guide has 8 sections and about 2,256 words.
01The financial management function
Financial management is concerned with planning, raising, investing and monitoring funds to meet an organisation's objectives. For a listed company the conventional primary objective is to maximise shareholder wealth, usually interpreted as maximising the present value of expected future cash flows and therefore the market value of equity.
289 words, about 1 min02The financial management environment
Financial managers operate within markets shaped by government and central banks. Fiscal policy uses taxation and public spending; monetary policy uses interest rates and money supply to influence inflation and activity.
296 words, about 1 min03Working capital management
Working capital is the investment in current assets less current liabilities: inventory, receivables and cash, financed partly by payables. Management aims to keep sufficient liquidity without over-investing.
296 words, about 1 min04Investment appraisal
Investment appraisal compares incremental cash flows. NPV discounts all relevant cash flows at the project's opportunity cost of capital and is preferred because it measures absolute value added.
297 words, about 1 min05Business finance
Business finance comes from internal retained earnings or external equity and debt. Equity includes ordinary shares, rights issues and venture capital; debt includes bank loans, overdrafts, loan notes, leases and convertible securities.
280 words, about 1 min06Cost of capital
Weighted average cost of capital is the average return required by providers of long-term finance, weighted by market values. Cost of equity can be estimated by the dividend valuation model, Ke = D1/P0 + g, or CAPM, Ke = Rf + beta times (Rm minus Rf).
278 words, about 1 min07Business valuations
Business valuation estimates what a company or share is worth. Asset-based methods value net assets, useful for property-heavy or liquidation situations but poor for going concerns with intangible value.
252 words, about 1 min08Risk management
Risk management identifies, measures and controls exposures. Business risk affects operations; financial risk arises from gearing, interest rates, currency and liquidity.
268 words, about 1 min