The Financial Management (FM) examining team set out what’s new from the September 2013 sitting
The format of the FM exam from September will be significantly different to the Professional Stage Financial Management module that it replaces; there will no longer be any objective test (OT) questions. Instead, you will need to answer three or four written test questions (WTQs). The sample paper contains three WTQs and the maximum mark for any one question will be 40. The level of difficulty will remain at the standard set by the Financial Management exams pre-September 2013.
The marks attached to the WTQs will broadly follow the syllabus weightings: there will be a risk question worth approximately 30 marks, with the two other questions covering the financing and investment sections of the syllabus worth approximately 35 marks each. Financing and investment may form the basis of two separate questions, or could be combined together within a single question.
The syllabus is largely unchanged except for the addition of ethics, which is examinable from the March 2014 sitting. However, there are some changes to the coverage of certain learning outcomes in the learning materials to better aid progression to the new Advanced Level Strategic Business Management exam. The major changes, together with other key updates, are as follows:
- Valuation of companies will now include the Shareholder Value Analysis approach introduced as part of investment appraisal. You will be required to calculate the value of a business using the seven value drivers and discuss the results.
- The section on the Efficient Market Hypothesis has been extended to include modern behavioural theories of investor behaviour. You should be able to discuss whether these behavioural theories mean markets are no longer (at least semistrong form) efficient.
- The section on CAPM has been extended to incorporate other models for adjusting for risk, which recognises the weaknesses of the CAPM model. You will be expected to be able to discuss the weaknesses of the CAPM and how these alternative models attempt to overcome the weaknesses.
- The corporation tax rate used will be 21% pa, with writing down allowances at 18% pa.
- The calculation of the contract size for stock index futures and options has been amended to bring it into line with the treatment used for foreign exchange futures and options. The futures or exercise price, as appropriate, will be used to determine the contract size, not the current spot rate.
- The calculation of the cost of redeemable debt has been altered to reflect the fact that premiums/discounts on redemption have a tax effect as well as the interest paid. The calculation will now be done as a gross redemption yield (ie, the cost of debt ignoring any tax relief ), adjusted for the tax relief as the final stage of the calculation.
- Removal of all OT questions from the exam.
These changes are all examinable from September 2013. Therefore it is important that you ensure you are studying from the correct learning materials for the exam sitting. If you are at all unsure, check with your tutors or contact the student support team.
This article originally appeared in the July 2013 edition of VITAL.