BPP ACCA p4 advance financial management 2017

ACCA approved content provider k k p p s s BPP Learning Media is dedicated to k supporting aspiring business professionals k o o o o with top-quality learning material b as they study for demanding professionaleeb e e r exams, often whilstFworking full time BPP Learning Media’s commitment Fr • A user-friendly format for easy navigation • Exam focus points describing what the examining team will want you to • 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 k p s ok o b e Fre Contact us BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia k p s ok o b e Fre k p s ok o b e Fre For exams in September 2016, December 2016, March 2017 and June 2017 k p s k In addition to ACCA examining team reviewed material you get: k p s ok o b e e Fr o b e re F Study Text k p s k Paper P4 Advanced Financial Management This ACCA Study Text for Paper P4 Advanced Financial Management has been comprehensively reviewed by the ACCA examining team This review guarantees appropriate depth and breadth of content and comprehensive syllabus coverage k p s ok Advanced Financial Management 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 P4 k p s k ACCA APPROVED CONTENT PROVIDER k p s ok o b e re F ACCA Approved Study Text k p s Paper P4 k o o b Advanced ree Financial Management F For exams in September 2016, December 2016, March 2017 and June 2017 k p s ook eb e r F k p s ok o b e Fre Free access to our Exam k p Success site s k o o b e inside eLook Fr February 2016 £32.00 k p s k ACP4ST16 (RICOH).indd 1-3 eb e r F o k p s ok bo e e Fr k p s ok b e Fre k p s ook k p s ook b e Fre 04/02/2016 13:21 ACCA APPROVED CONTENT PROVIDER pk ks o o eb o b e re k p s ok re F F 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 k p s ok k p s ook To access the Exam Success site, please email learningmedia@bpp.com 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: o b e re F b e Fre 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 k p s ok k p s k o o eb Select the paper you wish to access o eb e r F n Enter the code you received when prompted You will only have to this once for each paper you are studying eb e r F k p s ook Fre e e r F b k p s ook Fre k p s k o o eb PAPER P4 eeb r k p s ook F ADVANCED FINANCIAL MANAGEMENT o b e re F k p s ok S T U D Y T k E p s k o o b e X Fre T 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 k p s ok k p s ok 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  o b e re F 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 o b e re F BPP's Practice & Revision Kit also supports this paper FOR EXAMS IN SEPTEMBER 2016, DECEMBER 2016, MARCH 2017 AND JUNE 2017 F o b e re k p s ok F o b e re k p s ok First edition 2007 Ninth edition January 2016 k o o eb ISBN 9781 4727 4430 (Previous ISBN 9781 4727 2682 7) Fre s.pk e-ISBN 9781 4727 4672 (Previous e-ISBN 9781 4727 2760 2) British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by www.bpp.com/learningmedia Printed in the United Kingdom by k p s ook b e Fre Dear Customer o b e re k p s ok What does the little © mean and why does it matter? 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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 o b e re k p s ok F ii F o b e re k p s ok o b e re F k p s ok k p s ok F o b e re Contents k p s k o o eb re FIntroduction o b e re F Helping you to pass Studying P4 The exam paper and exam formulae Syllabus and study guide k p s ok Page v vii xiv xvi Part A Role of the senior financial advisor in the multinational organisation 4a 4b The role and responsibility of the senior financial advisor Financial strategy formulation Ethical and governance issues Trading in a multinational environment Planning in a multinational environment 7a 7b Discounted cash flow techniques Application of option pricing theory in investment decisions Impact of financing on investment decisions and adjusted present values Valuation and the use of free cash flows International investment and financing decisions k p s k investment appraisal o Part B Advanced o eb e r F 29 69 87 123 k p s ook b e Fre 153 179 199 255 271 Part C Acquisitions and mergers 10 11 12 Acquisitions and mergers versus other growth strategies Valuation of acquisitions and mergers Regulatory framework and processes Financing mergers and acquisitions 297 313 343 355 Part D Corporate reconstruction and reorganisation 13 14 Financial reconstruction Business reorganisation k p s ok 369 383 k p s ok Part E Treasury and advanced risk management techniques 15 16 17 Fr o b e e The role of the treasury function in multinationals The use of financial derivatives to hedge against foreign exchange risk The use of financial derivatives to hedge against interest rate risk o b e e Fr Appendix: Mathematical tables Practice question bank Practice answer bank Index Review form F o b e re 399 417 467 505 511 537 601 k p s ok k p s ok F o b e re Contents iii Fre k p s k o o eb k p s ook b e Fre o b e re iv F Introduction F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Helping you to pass k p s k – Approved Content Provider BPP Learning Media o o eb e r F o b e re k p s ok F 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 have to not only 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 k p s ook k p s ook Tackling studying b e Fre b e Fre 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 Texts are completely focused on helping you pass your exam Our advice on Studying P4 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 k p s ok k p s ok You can find the syllabus and Study Guide on pages xvi–xxvi of this Study Text o b e re Testing what you can F o b e re F 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 F o b e re k p s ok k p s ok F o b e re Introduction v Chapter features pk ks o o eb o b e re Each chapter contains a number of helpful features to guide you through each topic Fre Topic list Topic list Syllabus reference k p s ok F 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 k p s ook eb e r FExamples k p s ook b e Fre 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) Questions.pk k o o eebCase Study Fr vi o b e re Real world examples of theories and techniques F 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 o b e re F Introduction k p s ok Gives you essential practice of techniques covered in the chapter k p s ok k p s ok F o b e re Studying P4 k p s k o o eb o b e re k p s ok As the name suggests, this paper examines advanced financial management topics and is particularly suited to those who are thinking about a career in treasury or are likely to be involved in strategic financial management decisions Fre F What P4 is about The aim of the syllabus is to develop students' ability to apply relevant knowledge and skills, and exercise the professional judgement expected of a senior financial adviser, in taking or recommending financial management decisions that are likely to have an impact on the entire organisation This is an advanced level optional paper which builds on the topics covered in Paper F9 Financial Management As an advanced paper, it tests much more than just your ability to perform calculations You must be able to evaluate data, assess the potential financial and strategic consequences of taking investment decisions and advise on alternative courses of action, among other things, in both a domestic and international context k p s ook k p s ook The syllabus is divided into five main sections (a) The role of the senior financial adviser in the multinational organisation b e Fre b e Fre More than ever, company management's responsibility towards all stakeholders is under scrutiny They must be aware of different stakeholder groups' conflicting needs and be able to develop suitable financial strategies that fulfil each group's interests as much as possible The impact of environmental factors should also be uppermost in their minds given the increasing importance placed on such factors in the modern business world Ethical issues cannot be ignored – ethics are expected to be a consistent theme in the examination, and students will be expected to be able to take a practical approach to identifying such issues in given scenarios Multinational companies have their own unique set of challenges, including having operations in international locations You will be expected to have detailed knowledge and understanding of how to manage international finances and strategic business and financial planning for companies with international operations (b) Advanced investment appraisal k p s ok k p s ok This section revisits investment and financing decisions with the emphasis moving from straightforward technical knowledge towards the strategic issues associated with making investment decisions, both domestic and international o b e re F (c) (d) Acquisitions and mergers o b e re F You will be expected to discuss the logic of a growth strategy based on acquisitions, to choose and apply an appropriate method of valuation and make strategic decisions regarding how the merger or acquisition should be financed You will be required to act in an advisory as well as technical capacity Corporate reconstruction and reorganisation This section looks at how to put together a restructuring package and ways in which an organisation might be reorganised (for example, management buyouts and sell-offs) As above, you will be expected to act in both a technical and advisory capacity in questions on this section F o b e re k p s ok k p s ok F o b e re Introduction vii (e) Fre Treasury and advanced risk management techniques k p s k o o eb k p s ok This section covers distinct areas of risk and how to measure and manage them Interest rate and currency risks and the derivatives used to hedge against them are considered in detail You will be required not only to know how the derivatives work but also to advise on the best methods of hedging in particular scenarios Skills you have to demonstrate o b e re F 2.1 Knowledge and application Even with exams you've previously taken, you'll remember that passing didn't only mean reproducing knowledge You also had to apply what you knew At Professional level, the balance is tilted much more towards application You will need a sound basis of technical knowledge The exams will detect whether you have the necessary knowledge However, you won't pass if you just spend your time acquiring knowledge Developing application skills is vital 2.2 Application skills k p s ook k p s ook What application skills you need? Many P4 questions will include detail in a scenario about a specific organisation The following skills are particularly important when you're dealing with question scenarios b ree (a) F b Identifying the most important features of the organisation and the organisation's environment Clues to these will be scattered throughout the scenario The technical knowledge that you have should help you this, but you will also need business awareness and imagination There will be a main theme running through most scenarios that you'll need to identify e Fre (b) Using analysis techniques that will give you more insight into the data that you're given (c) Making informed judgements that follow from your analysis about what the organisation is doing and should be doing (d) Communicating clearly and concisely your analysis and recommendations How to pass 3.1 Study the whole syllabus You need to be comfortable with all areas of the syllabus Compulsory Question will always span a number of syllabus areas and other questions may so as well In particular you must have a very good knowledge and awareness of the themes in the ethical section of the syllabus, as compulsory Question will always include an element on ethics o b e re k p s ok F k p s ok o b e re F The examination team has also stressed that study and revision should cover the entire syllabus in detail Students should not question spot or prioritise one area of the syllabus over another The examination team has identified in its examination team's reports those topics which students who question spotted clearly believed would not be examined, but unfortunately were 3.2 Focus on themes, not lists There are quite a number of lists in the Texts This is inevitable because corporate governance guidance quoted as best practice is often in list form Lists are also sometimes the clearest way of presenting information However, the examination team has stressed that passing the exam is not a matter of learning and reproducing lists Good answers will have to focus on the details in the scenario and bring out the underlying themes that relate to the scenario The points in them will have more depth than a series of single-line bullet points viii F o b e re Introduction k p s ok k p s ok F o b e re Fre k p s k o o eb k p s ook b e Fre o b e re Notes F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Notes Fre k p s k o o eb k p s ook b e Fre o b e re Notes F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Notes Fre k p s k o o eb k p s ook b e Fre o b e re Notes F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Notes Fre k p s k o o eb k p s ook b e Fre o b e re Notes F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Notes Fre k p s k o o eb k p s ook b e Fre o b e re Notes F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Notes Fre k p s k o o eb k p s ook b e Fre o b e re Notes F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re Notes Fre k p s k o o eb k p s ook b e Fre o b e re Notes F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re k p s k o o eb Review Form – Paper P4 Advanced Financial Management (01/16) k p s ok Please help us to ensure that the ACCA learning materials we produce remain as accurate and user-friendly as possible We cannot promise to answer every submission we receive, but we promise that it will be read and taken into account when we update this Study Text Fre o b e re F Name: Address: During the past six months you recall seeing/receiving any of the following? 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Provider BPP Learning Media o o eb e r F o b e re k p s ok F As ACCA' s Approved Content Provider, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examination... chapter k p s ok k p s ok F o b e re Studying P4 k p s k o o eb o b e re k p s ok As the name suggests, this paper examines advanced financial management topics and is particularly suited to