BPP ACCA f9 financial management book 2017

ACCA APPROVED

In addition to ACCA examining team reviewed
material you get:
• A user-friendly format for easy navigation
• Exam focus points describing what the examining
team will want you to do
• Regular Fast Forward summaries emphasising the
key points in each chapter
• Questions and quick quizzes to test your
understanding
• A practice question bank containing exam-
standard questions with answers
• A full index
• All you need in one book

Study Text

Paper F9
Financial Management
This ACCA Study Text for Paper F9 Financial
Management has been comprehensively reviewed by
the ACCA examining team. This review guarantees
appropriate depth and breadth of content and
comprehensive syllabus coverage.

Financial Management

BPP Learning Media is dedicated to supporting aspiring business professionals
with top-quality learning material as they study for demanding professional
exams, often whilst working full time. BPP Learning Media’s commitment

to student success is shown by our record of quality, innovation and market
leadership in paper-based and e-learning materials. BPP Learning Media’s study
materials are written by professionally qualified specialists who know from
personal experience the importance of top-quality materials for exam success.

ACCA F9

ACCA approved content provider

A-PDF Text
Replace
DEMO: Purchase from www.A-PDF.com to remove the watermark
CONTENT
PROVIDER

ACCA Approved
Study Text

BPP House
142-144 Uxbridge Road
London W12 8AA
United Kingdom
T 0845 075 1100 (UK)
T +44 (0)20 8740 2211 (Overseas)
E
bpp.com/learningmedia
February 2016
£32.00

For exams in September 2016, December

2016, March 2017 and June 2017

Contact us

Paper F9
Financial Management

Valid for both
paper and
computer based
exams

For exams in September 2016, December
2016, March 2017 and June 2017

/>
ACF9ST16 (RICOH).indd 1-3

05/02/2016 16:13


ACCA APPROVED CONTENT PROVIDER

As the first accredited publisher of ACCA materials, BPP Learning Media has set the benchmark for
producing exceptional study materials for students and tutors alike.
Our Study Texts, Practice & Revision Kits and i-Passes (for exams on demand) are reviewed by the ACCA
examining team and are written by our in-house authors with industry and teaching experience who
understand what is required for exam success.

EXAM SUCCESS SITE

To help maximise your chances of succeeding in your exams, we’ve put together a suite of exclusive ACCA
resources. Our Exam Success site provides you with access to a free digital version of this publication, as
well as extra resources designed to focus your efforts on exams and study methods.
To access the Exam Success site, please email with the subject line “Access to Exam
Success site - eBook”, including your order reference number and the name of the book you’ve bought (ie
ACCA F5 Study Text) for your access code. Once you have received your code, please follow the instructions
below:

To access the BPP ACCA Exam Success site for this material
please go to:
www.bpp.com/ExamSuccessSite
n Create a user account if you don’t already have one.

Make sure you reply to the confirmation email.
n Log in using your registered username and password.

Select the paper you wish to access.
n Enter the code you received when prompted. You will only

have to do this once for each paper you are studying.

/>

S
T
U
D
Y

PAPER F9

FINANCIAL MANAGEMENT

BPP Learning Media is an ACCA Approved Content Provider. This means we work
closely with ACCA to ensure this Study Text contains the information you need to pass
your exam.
In this Study Text, which has been reviewed by the ACCA examination team, we:


Highlight the most important elements in the syllabus and the key skills you need



Signpost how each chapter links to the syllabus and the study guide



Provide lots of exam focus points demonstrating what is expected of you in the exam



Emphasise key points in regular fast forward summaries



Test your knowledge in quick quizzes



Examine your understanding in our practice question bank



Reference all the important topics in our full index

BPP's Practice & Revision Kit also supports this paper.

FOR EXAMS FROM IN SEPTEMBER 2016,
DECEMBER 2016, MARCH 2017 AND JUNE 2017

/>
T
E
X
T


A note about copyright

First edition 2007
Ninth edition February 2016

Dear Customer

ISBN 9781 4727 4426 5
(Previous ISBN 9781 4727 2678 0)

What does the title © mean and why does it matter?

e-ISBN 9781 4727 4668 9
British Library Cataloguing-in-Publication Data

A catalogue record for this book
is available from the British Library

Your market-leading BPP books, course materials and elearning materials do not write and update themselves.
People write them on their own behalf or as employees of
an organisations that invests in this activity. Copyright
law protects their livelihoods. It does so by creating
rights over the use of the content.
Breach of copyright is a form of theft – as well as being a
criminal offence in some jurisdictions, it is potentially a
serious breach of professional ethics.

Published by
BPP Learning Media Ltd
BPP House, Aldine Place
London W12 8AA

With current technology, things might seem a bit hazy
but, basically, without the express permission of BPP
Learning Media:

www.bpp.com/learningmedia



Photocopying our materials is a breach of
copyright



Scanning, ripcasting or conversion of our digital
materials into different file formats, uploading
them to facebook or e-mailing them to your friends
is a breach of copyright

Printed in the United Kingdom by
RICOH UK Limited
Unit 2
Wells Place
Merstham
RH1 3LG

Your learning materials, published by BPP Learning
Media Ltd, are printed on paper obtained from traceable
sustainable Media Ltd, are printed on paper obtained
from traceable sustainable sources.

All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system or transmitted,
in any form or by any means, electronic, mechanical,
photocopying, recording or otherwise, without the prior
written permission of BPP Learning Media Ltd.

You can, of course, sell your books, in the form in which
you have bought them – once you have finished with
them. (Is this fair to your fellow students? We update for
a reason.) Please note the e-products are sold on a single
user licence basis: we do not supply 'unlock' codes to
people who have bought them secondhand.
And what about outside the UK? BPP Learning Media

strives to make our materials available at prices students
can afford by local printing arrangements, pricing
policies and partnerships which are clearly listed on our
website. A tiny minority ignore this and indulge in
criminal activity by illegally photocopying our material or
supporting organisations that do. If they act illegally and
unethically in one area, can your really trust them?

We are grateful to the Association of Chartered Certified
Accountants for permission to reproduce past
examination questions. The suggested solutions in the
practice answer bank have been prepared by BPP
Learning Media Ltd, unless otherwise stated.
©
BPP Learning Media Ltd
2016

ii
/>

Contents
Page

Introduction
Helping you to pass
Studying F9
The exam paper and exam formulae
Syllabus and study guide

v

vii
ix
xi

Part A Financial management function
1

Financial management and financial objectives

3

Part B Financial management environment
2
3

The economic environment for business
Financial markets, money markets and institutions

37
57

Part C Working capital management
4
5
6

Working capital
Managing working capital
Working capital finance

79
93
119

Part D Investment appraisal
7
8
9
10
11

Investment decisions
Investment appraisal using DCF methods
Allowing for inflation and taxation
Project appraisal and risk
Specific investment decisions

143
159
177
189
205

Part E Business finance
12
13
14
15
16

Sources of finance
Dividend policy
Gearing and capital structure
The cost of capital
Capital structure

225
259
269
291
317

Part F Business valuations
17
18

Business valuations
Market efficiency

337
361

Part G Risk management
19
20

Foreign currency risk
Interest rate risk

373

401

Appendix – Mathematical tables

415

Practice question bank
Practice answer bank
Index

419
455
507

Review form

Contents

/>
iii


iv

Introduction

/>

Helping you to pass
BPP Learning Media – ACCA Approved Content Provider

As ACCA's Approved Content Provider, BPP Learning Media gives you the opportunity to use study
materials reviewed by the ACCA examination team. By incorporating the examination team's comments
and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study
Text provides excellent, ACCA-approved support for your studies.

The PER alert
Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil a three
year practical experience requirement (PER). To help you to recognise areas of the syllabus that you
might be able to apply in the workplace to achieve different performance objectives, we have introduced
the 'PER alert' feature. You will find this feature throughout the Study Text to remind you that what you
are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement.
Your achievement of the PER should now be recorded in your online My Experience record.

Tackling studying
Studying can be a daunting prospect, particularly when you have lots of other commitments. The different
features of the Study Text, the purposes of which are explained fully on the Chapter features page, will
help you whilst studying and improve your chances of exam success.

Developing exam awareness
Our Study Texts are completely focused on helping you pass your exam.
Our advice on Studying F9 outlines the content of the paper, the necessary skills you are expected to be
able to demonstrate and any brought forward knowledge you are expected to have.
Exam focus points are included within the chapters to highlight when and how specific topics were
examined, or how they might be examined in the future.

Using the syllabus and study guide
You can find the syllabus and study guide on pages xi–xxi of this Study Text.

Testing what you can do
Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can

recall what you have learnt.
We include Questions – lots of them – both within chapters and in the Practice Question Bank, as well as
Quick Quizzes at the end of each chapter to test your knowledge of the chapter content.

Introduction

/>
v


Chapter features
Each chapter contains a number of helpful features to guide you through each topic.
Topic list
Topic list

Syllabus reference

What you will be studying in this chapter and the relevant
section numbers, together with ACCA syllabus references.

Introduction

Puts the chapter content in the context of the syllabus as
a whole.

Study Guide

Links the chapter content with ACCA guidance.

Exam Guide

Highlights how examinable the chapter content is likely to
be and the ways in which it could be examined.

Knowledge brought forward from earlier studies

What you are assumed to know from previous
studies/exams.

FAST FORWARD

Summarises the content of main chapter headings,
allowing you to preview and review each section easily.

Examples

Demonstrate how to apply key knowledge and
techniques.

Key terms

Definitions of important concepts that can often earn you
easy marks in exams.

Exam focus points

When and how specific topics were examined, or how
they may be examined in the future.

Formula to learn

Formulae that are not given in the exam but which have to
be learnt.
Gives you a useful indication of syllabus areas that
closely relate to performance objectives in your Practical
Experience Requirement (PER).

vi

Question

Gives you essential practice of techniques covered in the
chapter.

Case Study

Real world examples of theories and techniques.

Chapter Roundup

A full list of the Fast Forwards included in the chapter,
providing an easy source of review.

Quick Quiz

A quick test of your knowledge of the main topics in the
chapter.

Practice Question Bank

Found at the back of the Study Text with more
comprehensive chapter questions. Cross referenced for
easy navigation.

Introduction

/>

Studying F9
This paper examines a wide range of financial management topics, many of which will be completely new
to you. You will need to be competent at a range of quite tricky calculations as well as being able to
explain and discuss financial management techniques and issues.

The F9 examination team
The ACCA examination team expects you to be able to perform and comment on calculations, exercise
critical abilities, clearly demonstrate understanding of the syllabus and use question information.

Syllabus update
The F9 syllabus has been updated for the September 2016 sitting onwards. The syllabus changes are
summarised below.

Summary of changes to F9
There have been no amendments to the F9 syllabus since the last 2015-2016 syllabus. However, the
format of the exam has changed. See page ix.

Introduction

/>
vii

1 What F9 is about
The aim of this syllabus is to develop the knowledge and skills expected of a finance manager in relation to
investment, financing and dividend policy decisions.
F9 is a middle level paper in the ACCA qualification structure. There are some links to material you have
covered in F2, particularly short-term decision-making techniques. The paper with a direct link following
F9 is P4 which thinks strategically and considers wider environmental factors. F9 requires you to be able
to apply techniques and think about their impact on the organisation.

2 What skills are required?



You are expected to have a core of management accounting knowledge from Paper F2.
You will be required to carry out calculations, with clear workings and a logical structure.



You will be required to interpret data.



You will be required to explain management accounting techniques and discuss whether they are
appropriate for a particular organisation.
You must be able to apply your skills in a practical context.



3 How to improve your chances of passing


There is no choice in this paper; all questions have to be answered. You must therefore study the
entire syllabus; there are no shortcuts.



The first section of the paper consists of 15 multiple choice questions, worth two marks each.
These will inevitably cover a wide range of the syllabus.
Practising questions under timed conditions is essential. BPP's Practice & Revision Kit contains 2
mark, 10 mark and 20 mark questions to help you practise this.
Questions in Sections B and C will be based on simple scenarios and answers to Section C
questions must be focused and specific to the organisation.









Answer plans in Section C will help you to focus on the requirements of the question and enable
you to manage your time effectively.
Answer all parts of the questions in Section C. Even if you cannot do all of the calculation
elements, you will still be able to gain marks in the discussion parts.
Make sure your answers focus on practical applications of management accounting, common
sense is essential!
Keep an eye out for articles, as the examination team will use the articles to communicate with
students.
Read journals etc to pick up on ways in which real organisations apply management accounting

and think about your own organisation if that is relevant.

4 Brought forward knowledge
You will need to have a good working knowledge of certain management accounting techniques from F2.
In particular, you will need to be familiar with the capital budgeting process, and be able to apply the
concepts of interest and discounting. This includes being able to calculate annuities and perpetuities, and
to use the discount and annuity tables to calculate net present values.
This Study Text revises these topics and brought forward knowledge is identified. If you struggle with the
examples and questions used, you must go back and revisit your previous work. The ACCA examination
team will assume you know this material and it may form part of an exam question.

viii

Introduction

/>

The exam paper and exam formulae
Format of the paper
From September 2016, the exam will be 3 hours and 15 minutes in duration. The exam paper is divided
into three sections.
Section A consists of 15 multiple choice questions of two marks each. These questions can be on any part
of the syllabus.
Section B consists of 15 mini scenario based multiple choice questions of two marks each. These
questions can be on any part of the syllabus.
Section C consists of 2 constructive response questions of 20 marks, and answers to the questions will
require a mixture of calculations and discussion. The 20 mark questions will cover Parts C, D and E of the
syllabus.
All questions are compulsory.
The exam will cover as much of the syllabus as possible.

Computer Based Examination
ACCA have announced that they intend to commence the launch of computer-based exams (CBEs) for F5–
F9 towards the end of 2016. At the time of going to print the exact details had not been confirmed. Paperbased examinations will be run in parallel while the CBEs are phased in and BPP materials have been
designed to support you, whichever exam option you choose.

Exam formulae
Set out below are the formulae you will be given in the exam. If you are not sure what the symbols
mean, or how the formulae are used, you should refer to the appropriate chapter in this Study Text.
Chapter in
Study Text
5

Economic order quantity
=

2C0D
Ch
6

Miller-Orr Model

Return point = Lower limit + (

1
 spread)
3
1

3

3
 4  transaction cos t  variance of cash flows 
Spread = 3 

int erest rate





15

The Capital Asset Pricing Model

E(ri) = Rf + ßi(E (rm) – Rf)
16

The asset beta formula


  Vd (1 T)

Ve
ßa = 
e  + 
d 





(V
V
(1
T))
(V
V
(1
T))
 e
  e

d
d

Introduction

/>
ix


15

The Growth Model

P0 =

D0 (1 g)
(re  g)
15

Gordon's growth approximation

g = bre
15

The weighted average cost of capital

 V 
WACC =  e  ke +
 Ve  Vd 

 Vd 

 kd (1–T)
 Ve  Vd 
9

The Fisher formula

(1 + i) = (1 + r)(1 + h)
Purchasing power parity and interest rate parity

S1 = S0 

x

(1 hc )
(1 hb )

F0 = S0 

(1 ic )
(1 ib )

Introduction

/>
19


Syllabus and Study Guide
The F9 syllabus and Study Guide can be found below.

Introduction

/>
xi


xii

Introduction

/>

Introduction

/>
xiii

xiv

Introduction

/>

Introduction

/>
xv


xvi

Introduction

/>

Introduction

/>
xvii


xviii

Introduction

/>

Introduction

/>
xix


xx

Introduction

/>

Introduction

/>
xxi


xxii

Introduction

/>

P
A
R
T
A

Financial management function

1
/>