PAPER F9 FINANCIAL MANAGEMENT BPP Learning Media is the sole ACCA Platinum Approved Learning Partner – content for the ACCA qualification In this, the only Paper F9 Practice and Revision Kit to be reviewed by the examiner: We discuss the best strategies for revising and taking your ACCA exams We show you how to be well prepared for your exam We give you lots of great guidance on tackling questions We show you how you can build your own exams We provide you with three mock exams including the December 2011 exam We provide the ACCA examiner's answers as well as our own to the June and December 2011 exams as an additional revision aid Our i-Pass product also supports this paper FOR EXAMS IN 2012 P R A C T I C E & R E V I S I O N K I T First edition 2007 Sixth edition January 2012 ISBN 9781 4453 7999 (previous ISBN 9780 7517 9407 6) e-ISBN 9781 4453 2424 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www.bpp.com/learningmedia All our 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 We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the exam answer bank have been prepared by BPP Learning Media Ltd, except where otherwise stated Printed in the United Kingdom Your learning materials, published by BPP Learning Media Ltd, are printed on paper sourced from sustainable, managed forests ii © BPP Learning Media Ltd 2012 Contents Page Finding questions Question index iv Topic index viii Helping you with your revision – the ONLY F9 Practice and Revision Kit to be reviewed by the examiner! ix Revising F9 Topics to revise x Question practice x Passing the F9 exam xi Exam formulae xiii Formulae to learn xiv Exam information xvi Useful websites xxi Planning your question practice BPP Learning Media's question plan xxii Build your own exams xxvi Questions and answers Questions Answers 67 Exam practice Mock exam Questions 277 Plan of attack .283 Answers .284 Mock exam Questions 299 Plan of attack .305 Answers .306 Mock exam (December 2011) Questions 321 Plan of attack .327 Answers .328 ACCA examiner's answers June 2011 341 December 2011 351 Mathematical tables 363 Review form iii Question index The headings in this checklist/index indicate the main topics of questions, but questions often cover several different topics Questions set under the old syllabus Financial Management and Control (FMC) are included because their style and content are similar to those that appear in the Paper F9 exam Time Page number Marks allocation Mins Question Answer Part A: Financial management function ABC Co 25 45 67 RZP Co (FMC, 6/05) 25 45 69 Part B: Financial management environment Tagna (FMC, 6/03, amended) 25 45 71 Phoenix 25 45 73 Part C: Working capital management East Meets West Co 25 45 76 JIT and EOQ 25 45 78 PNP Co (FMC, 6/07) 25 45 81 Thorne Co (FMC, 12/05) 25 45 10 83 Velm Co (FMC, 6/03) 25 45 10 86 10 PCB Co 25 45 11 89 11 Special Gift Suppliers (FMC, 12/01) 25 45 12 91 12 Ulnad Co (Pilot paper) 25 45 13 93 13 PKA Co (12/07) 25 45 14 96 14 FLG Co (6/08) 25 45 14 99 15 HGR Co (6/09) 25 45 15 102 16 APX Co (12/09) 25 45 16 106 17 ZSE Co (6/10) 25 45 17 109 18 WQZ Co (12/10) 25 45 18 112 n/a n/a 19 114 Part D: Investment appraisal 19 Preparation question: Investment appraisal iv 20 Chromex Co 25 45 19 115 21 Preparation question: NPV with inflation and tax n/a n/a 20 118 22 Trecor Co (Pilot paper) 25 45 21 119 23 OKM Co (6/10) 25 45 21 121 24 CJ Co (12/10) 25 45 22 124 25 BRT Co (6/11) 25 45 23 127 26 Preparation question: Sensitivity analysis n/a n/a 24 130 27 Umunat Co (FMC, 12/04) 25 45 24 132 28 Duo Co (12/07) 25 45 25 134 29 SC Co (6/08) 25 45 25 137 Finding questions Time Page number Marks allocation Mins Question Answer 30 Rupab Co (12/08) 25 45 26 141 31 PV Co (6/09) 25 45 27 144 32 AGD Co (FMC, 12/05) 25 45 27 147 33 Leaminger Co (FMC, 12/02) 25 45 28 150 34 ASOP Co (12/09) 25 45 29 152 35 Preparation question: Bread Products Co n/a n/a 29 156 36 Filtrex Co 25 45 30 158 37 Basril Co (FMC, 12/03) 25 45 31 160 38 Tirwen Co (FMC, 12/04) 25 45 32 163 39 PG 25 45 33 165 40 Newsam Co 25 45 33 167 41 Arwin (FMC, 6/04) 25 45 35 171 42 Food retailers 25 45 36 173 43 CF Co 25 45 36 175 44 TFR Co (FMC, 6/07) 25 45 37 179 45 Echo Co (12/07) 25 45 38 182 46 JJG Co (6/09) 25 45 39 185 47 Nugfer Co (12/10) 25 45 40 188 48 YNM Co (6/11) 25 45 41 192 49 D Co 25 45 42 194 50 IML Co 25 45 42 197 51 KJI 25 45 43 199 52 WEB Co 25 45 44 201 53 CAP Co 25 45 45 204 54 FAQ 25 45 45 207 55 Droxfol Co (Pilot paper) 25 45 46 209 56 Burse Co (6/08) 25 45 47 212 57 DD Co (12/09) 25 45 48 215 58 YGV Co (6/10) 25 45 49 218 59 NN Co (12/10) 25 45 50 221 60 AQR Co (6/11) 25 45 51 224 Part E: Business finance Part F: Cost of capital Finding questions v Time Page number Marks allocation Mins Question Answer 61 MC 25 45 52 227 62 BST 25 45 53 230 63 Phobis Co (12/07) 25 45 54 233 64 THP Co (6/08) 25 45 54 237 65 Dartig Co (12/08) 25 45 55 240 66 KFP Co (6/09) 25 45 56 243 67 QSX Co (6/10) 25 45 57 246 68 Marton Co 25 45 58 248 69 BS 25 45 59 251 70 Nedwen Co (Pilot paper) 25 45 60 253 71 Boluje Co (12/08) 25 45 60 256 72 NG Co (12/09) 25 45 61 259 73 ZPS Co (6/11) 25 45 62 262 74 Preparation question: Interest rates n/a n/a 63 265 75 Preparation question: QW n/a n/a 63 267 76 Gorwa Co (12/08) 25 45 64 269 Part G: Business valuations Part H: Risk management Mock exam Questions 77 to 80 Mock exam Questions 81 to 84 Mock exam (December 2011) Questions 85 to 88 vi Finding questions Planning your question practice Our guidance from page xxii shows you how to organise your question practice, either by attempting questions from each syllabus area or by building your own exams – tackling questions as a series of practice exams Using your BPP Learning Media products This Kit gives you the question practice and guidance you need in the exam Our other products can also help you pass: Learning to Learn Accountancy gives further valuable advice on revision Passcards provide you with clear topic summaries and exam tips Success CDs help you revise on the move i-Pass CDs offer tests of knowledge against the clock You can purchase these products by visiting www.bpp.com/mybpp Finding questions vii Topic index Listed below are the key Paper F9 syllabus topics and the numbers of the questions in this Kit covering those topics If you need to concentrate your practice and revision on certain topics or if you want to attempt all available questions that refer to a particular subject, you will find this index useful Syllabus topic Asset replacement decisions Betas Business valuation Capital rationing CAPM Cash management Cash operating cycle Competition policy Convertible loan notes Cost of capital Dividend policy EOQ Exchange rate risk Financial intermediaries Gearing Inflation Interest rate risk Interest rates Inventory management Investment appraisal IRR Islamic finance Leasing Managerial reward schemes NPV Objectives Overtrading Payback Pecking order Project-specific discount rate Ratio analysis Receivables management Rights issue Risk and uncertainty Sensitivity analysis Shareholder wealth maximisation SME's Sources of finance Stock market efficiency Total shareholder return Value for money WACC Working capital financing Working capital management viii Finding questions Question numbers 34, 35 50, 53, 54, 56, 57 61 – 67, 33, 36, 37 30, 49, 50, 53, 54 8, 10, 12, 15, 43 5, 7, 14 3, 20 39, 40, 52, 63 49, 52 – 60 42, 45, 48, 57, 59 6, 13, 14, 18 7, 13, 68 – 73 4, 16 40, 41, 49, 55, 57, 58 5, 21, 22, 23, 70 74, 75, 76 3, 74, 75, 76 6, 13, 18 19 – 37 19, 22, 28, 29, 31 43 32, 33, 34, 45 2, 65 19, 21 – 37 1, 13, 17, 46, 48 10, 76 19, 20, 27, 31 54, 66, 71 24, 30, 54 1, 2, 4, 14, 20, 38 – 42, 44, 46, 51, 55 7, 9, 11, 13, 14, 15, 17, 68, 76 38, 39, 45, 46, 64, 65, 72 25, 27 26, 27, 28 1, 3, 29, 46 43, 44 38 – 48, 52, 58, 64, 71 49, 50, 63, 64 1, 2, 67 49, 41, 52, 53, 55, 56, 57, 58, 59, 60, 66 5, 9, 10, 11, 12, 14, 15, 16, 32 – 18, 73 Helping you with your revision – the ONLY F9 Practice and Revision Kit to be reviewed by the examiner! BPP Learning Media – the sole Platinum Approved Learning Partner content As ACCA’s sole Platinum Approved Learning Partner – content, BPP Learning Media gives you the unique opportunity to use examiner-reviewed revision materials for the 2012 exams By incorporating the examiner’s comments and suggestions regarding syllabus coverage, the BPP Learning Media Practice and Revision Kit provides excellent, ACCA-approved support for your revision Tackling revision and the exam You can significantly improve your chances of passing by tackling revision and the exam in the right ways Our advice is based on feedback from ACCA examiners We look at the dos and don’ts of revising for, and taking, ACCA exams We focus on Paper F9; we discuss revising the syllabus, what to (and what not to do) in the exam, how to approach different types of question and ways of obtaining easy marks Selecting questions We provide signposts to help you plan your revision A full question index A topic index listing all the questions that cover key topics, so that you can locate the questions that provide practice on these topics, and see the different ways in which they might be examined BPP's question plan highlighting the most important questions and explaining why you should attempt them Build your own exams, showing how you can practise questions in a series of exams Making the most of question practice At BPP Learning Media we realise that you need more than just questions and model answers to get the most from your question practice Our Top tips included for certain questions provide essential advice on tackling questions, presenting answers and the key points that answers need to include We show you how you can pick up Easy marks on some questions, as we know that picking up all readily available marks often can make the difference between passing and failing We include marking guides to show you what the examiner rewards We include examiners’ comments to show you where students struggled or performed well in the actual exam We refer to the 2011 BPP Study Text (for exams in 2012) for detailed coverage of the topics covered in questions In a bank at the end of this Kit we include the examiner's answers to the June and December 2011 papers Used in conjunction with our answers they provide an indication of all possible points that could be made, issues that could be covered and approaches to adopt Revising F9 ix 360 Examiner’s answers: December 2011 Mathematical tables 361 362 Mathematical tables 363 364 Mathematical tables Notes Notes Notes Notes Notes Notes Notes Notes Review Form – Paper F9 Financial Management (01/12) Name: Address: How have you used this Kit? (Tick one box only) During the past six months you recall seeing/receiving any of the following? (Tick as many boxes as are relevant) Home study (book only) On a course: college Our advertisement in Student Accountant With 'correspondence' package Our advertisement in Pass Other Our advertisement in PQ Our brochure with a letter through the post Why did you decide to purchase this Kit? (Tick one box only) Our website www.bpp.com Which (if any) aspects of our advertising you find useful? (Tick as many boxes as are relevant) Have used the complementary Study text Have used other BPP products in the past Recommendation by friend/colleague Prices and publication dates of new editions Recommendation by a lecturer at college Information on product content Saw advertising Facility to order books off-the-page Other None of the above Which BPP products have you used? Text Success CD Learn Online Kit i-Learn Home Study Package Passcard i-Pass Home Study PLUS Your ratings, comments and suggestions would be appreciated on the following areas Very useful Useful Not useful Good Adequate Poor Yes No Passing F9 Planning your question practice Questions Top Tips etc in answers Content and structure of answers Mock exam answers Overall opinion of this Kit Excellent Do you intend to continue using BPP products? The BPP author of this edition can be e-mailed at: andrewfinch@bpp.com Please return this form to: Ian Blackmore, ACCA Publishing Manager (Fundamentals papers), BPP Learning Media Ltd, FREEPOST, London, W12 8BR Review Form (continued) TELL US WHAT YOU THINK Please note any further comments and suggestions/errors below ...PAPER F9 FINANCIAL MANAGEMENT BPP Learning Media is the sole ACCA Platinum Approved Learning Partner – content for the ACCA qualification In this, the only Paper F9 Practice and Revision Kit... Discuss the role and purpose of the financial management function Assess and discuss the impact of the economic environment on financial management Discuss and apply working capital management techniques... must attempt Mock exams 1, and at the end of your revision xxvi Planning your question practice Questions FINANCIAL MANAGEMENT FUNCTION Questions and cover Financial Management Function, the subject