Revision Checklist

Part I Financial Management, Financial Objectives and Financial Environment

I. Essay Points

Revision Notes / Questions Reference
1. / Stakeholders
a. Categories of stakeholder group / 3.2 / Q2
b. Stakeholders’ areas of interest / 3.2 / Q2
2. / Financial Markets
a. Money markets / 8.1 / Q6
b. Capital markets / 8.2 / Q6
c. Euromarkets / 8.3 / Q6


Part II Investment Appraisal

I. Essay Points

Revision Notes / Questions Reference
1. / Payback period
a. Advantages and disadvantages / 1.1.7
2. / Accounting rate of return (ARR)
a. Advantages and disadvantages / 1.2.4
3. / NPV
a. Advantages and disadvantages / 1.3.6
b. NPV and the impact on shareholder wealth / 1.3.5 / Q17(d)
c. Why NPV is superior to other methods? / 1.3.7 / Q18(c)
4. / Relevant and non-relevant cash flows / 3.1 & 3.2 / Q14(d)
5. / Attractions of lease / 6.1.5 to 6.1.7 / Q40(d)
6. / Nature and causes of capital rationing / 6.4 / Q20(d)

II. Computations

Revision Notes / Questions Reference
1. / General NPV computation
a. NPV with inflation, tax, working capital and Fisher equation / 4 / Q10
Q15
Q18
Q19
2. / Profitability analysis with expected value / 5.2 / Q11(d)
Progressive Test 1 – Q1
3. / Lease or buy / 6 / Q12
Progressive Test 1 – Q2(a)
4. / Capital rationing for single period – with PI and trial and error / 6.4 / Q14


Part III Working Capital Management

I. Essay Points

Revision Notes / Questions Reference
1. / Objectives of WC management / 1 / Q22
2. / Limitations of EOQ / 4.2.3
3. / Advantages and disadvantages of JIT / 4.5.2 & 4.5.3 / Q27(b)
Q36(c)
4. / Factors when formulating WC policy on the management of receivables / 5.2 / Q27(d)
5. / Ways in which factoring and invoice discounting can assist in the receivables management / 5.4.1 & 5.5.1 / Q38(b)
6. / Reasons for holding cash / 8.1.1
7. / Treasury management / 10.
8. / Factors considered to invest short-term cash surplus / 11.1 / Q32(b)
9. / Advantages and disadvantages of OD / 12.2 / Q34

II. Computations

Revision Notes / Questions Reference
1. / EOQ / 4.2 / Q25(b)
Q27(a)
Q38(d)
2. / Changes in credit policy (receivables) / Q27(c)
Q33(a)
3. / Early settlement discount and bulk purchase discount / Q28(b)
4. / Cash budget and cash flow forecasts / 8.2 / Q30(b)
Q31(b),(d)
Q32(a)
Q36
5. / Calculate the size of OD / Q38(c)


Part IV Business Finance

I. Essay Points

Revision Notes / Questions Reference
1. / Dividend policy
a. Factors affecting dividend policy / 2.1 / Q39
Q61(d)
b. Theories of dividend policy / 2.2 / Q40
Q41
2. / Reasons for seeking debt finance / 5.1.1
3. / Venture capital / 6 / Q44
4. / Advantages and disadvantages for equity finance / 7.2
5. / Advantages and disadvantages of stock listings / 7.3 / Q45
6. / Advantages and disadvantages of placing / 7.4 / Q53(c)
7. / Attractions of rights issue / Q47(e)
8. / Islamic finance
a. Difference between Islamic and conventional finance / 8.2.1 / Q48
b. Marabaha (trade credit) / 8.4 / Q49
c. Ijara (lease finance) / 8.5 / Q49
d. Sukuk (debt finance) / 8.7 / Q49
e. Musharaka (venture capital) / 8.8
9. / Finance for SMEs / 12 / Q51

II. Computations

Revision Notes / Questions Reference
1. / Rights issue / 7.5 / Q40(c)
Q46
Q47
Q52
Q53(b)
2. / Suitable financing methods / Q54(a),(b)
3. / Financial performance / Q53(a)


Part V Cost of Capital

I. Essay Points

Revision Notes / Questions Reference
1. / CAPM
a. Assumptions of CAPM / 2.3.9
b. Problems of CAPM / 2.3.10
c. Comparison between DVM and CAPM / 2.4
2. / Marginal cost of capital / 5
3. / Capital structure theory
a. Traditional view / 6.1 / Q56(c)
b. M&M I (1958) / 7 / Q56(c)
c. M&M II (1963) / 8 / Q56(c)

II. Computations

Revision Notes / Questions Reference
1. / WACC (fully understand) / 2 / Q56(a)
Q57
Q58(a)
Q61(b),(c)
2. / Project-specific discount rate / 11 / Q16(e)
Q59
Q60


Part VI Business Valuations

I. Essay Points

Revision Notes / Questions Reference
1. / Problems of P/E method / 2.2.2
2. / Assumptions of dividend valuation model / 2.3.3
3. / Efficient market hypothesis
a. Three forms / 5 / Q65(b)
b. Implications for financial manager / 6 / Q65(b)
4. / Practical consideration in the valuation / 7

II. Computations

Revision Notes / Questions Reference
1. / Asset-based valuations / 2.1 / Q61(a)
Q66(a)
2. / P/E ratio method / 2.2 / Q56(b)
Q65(a)
Q66(a)
3. / Dividend valuation model / 2.3 / Q56(b)
Q61(a)
Q65(a)
Q66(a)
4. / Convertible bonds / Q65(b)


Part VII Risk Management

Revision Notes / Questions Reference
1. / Types of foreign currency risk / 2 / Q69
2. / Foreign currency derivatives / 5 / Q72(d)
3. / Causes of interest rate fluctuations
a. Term structures of interest rates and yield curve / 7.1
b. Factors affecting the shape of yield curve / 7.3 / Q73
c. Significant of yield curves to financial managers / 7.4
4. / Hedging techniques for interest rate risk
a. FRA / 8.2 / Q75
b. Interest rate futures / 8.3 / Q75
c. Interest rate options / 8.4 / Q75
d. Interest rate swaps / 8.5 / Q75

II. Computations

Revision Notes / Questions Reference
1. / Hedging techniques
a. Leading and lagging / 4.3 / Q70(d)
b. Forward contract / 4.6 / Q70(d)
Q71(b)
Q72(c)
c. Money market hedge / 4.7 / Q70(d)
Q71(b)
Q72(c)
2. / FRA / Q74(a)

3