CA Final AFM study guide
CA Final AFM · Work through your exam, one topic at a time.
CA Final Advanced Financial Management (AFM) is the elective paper of the CA Final level under the Institute of Chartered Accountants of India (ICAI). It is intended for candidates who have cleared earlier levels and want a finance-heavy specialisation rather than a general audit-and-tax profile. The CA Final AFM study guide has 9 sections and about 2,590 words.
01Financial Policy and Corporate Strategy
This domain links financial policy choices-investment, financing, dividend and liquidity-to corporate strategy and value creation. Questions often ask you to evaluate a strategic proposal, choose a capital structure, or critique a dividend decision using agency, signalling and stakeholder arguments.
309 words, about 2 min02Risk Management (including derivatives, hedging and exposure management)
Risk management covers identification, measurement and mitigation of market, credit, liquidity and operational risk. Expect VaR, duration gaps, credit metrics, hedging rationale and whether a hedge reduces economic exposure rather than only accounting volatility.
294 words, about 1 min03Advanced Capital Budgeting Decisions
Advanced capital budgeting examines incremental cash-flow estimation, replacement and expansion decisions, capital rationing, inflation, risk-adjusted discount rates, APV, real options, sensitivity and scenario analysis. Numerical questions are common.
292 words, about 1 min04Security Analysis and Portfolio Management
Security analysis and portfolio management tests equity and bond valuation, fundamental analysis, portfolio risk and return, CAPM, APT, performance measures, market efficiency and bond duration/immunisation. Portfolio expected return is weighted average; variance depends on covariances, not just individual variances.
278 words, about 1 min05Securitisation and Mutual Funds
Securitisation and mutual funds tests the mechanics of pooling and tranching, SPVs, credit enhancement, true sale, pass-through structures, and mutual fund NAV, loads, expenses and regulation. Securitisation transfers receivables to an SPV in a true sale, isolating them from the originator’s bankruptcy.
297 words, about 1 min06Derivatives Analysis and Valuation
Derivatives analysis and valuation covers forwards, futures, options and swaps: fair pricing, payoffs, arbitrage bounds, put-call parity, binomial and Black-Scholes models, and Greeks. Forward/futures fair price: F = S(1+r)^T for no income; with income yield q, F = S e^{(r−q)T}; with storage and convenience yield, adjust carry.
287 words, about 1 min07Foreign Exchange Exposure and Risk Management
Foreign exchange exposure and risk management tests transaction, translation and economic exposure, and hedging with forwards, futures, options, money-market hedges and swaps. Transaction exposure affects known foreign-currency cash flows; translation exposure affects reported financial statements; economic exposure affects long-run competitiveness.
287 words, about 1 min08International Financial Management
International financial management tests multinational capital budgeting, international parity conditions, foreign currency financing, country risk, transfer pricing and cross-border investment decisions. Purchasing power parity: expected spot ≈ spot × (1 + domestic inflation)/(1 + foreign inflation).
264 words, about 1 min09Mergers, Acquisitions and Corporate Restructuring
Mergers, acquisitions and corporate restructuring tests motives, synergy valuation, swap ratios, financing choices, takeover defences, demergers, buybacks and LBO mechanics. Synergy = PV(combined firm) − [PV(A) + PV(B)].
282 words, about 1 min