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The aim of this short article is to help you understand the approach that will be used in the Financial Strategy examination paper and project.

Scope of the assessments

It is vitally important for you to be aware of the scope and structure of both the examination and the project. For this, you need to take a look at:

• the syllabus
• the official ACCA Financial Strategy study guide
• the pilot examination paper and pilot project

You can find this information on ACCA’s website (www.accaglobal.com) if you do not already have copies. The syllabus only really provides an outline of the topics that will be assessed, however, this has been supplemented by a study guide which provides a much more detailed breakdown of these topics. You should not rely on the syllabus alone to try to identify the scope of the examination paper and project.

The key areas of the new Financial Strategy syllabus are as follows:

• investment appraisal
• raising finance
• capital markets
• working capital management
• mergers and acquisitions
• share valuation

These areas are likely to appear in the examination papers and projects time and time again. Indeed some areas, such as investment appraisal, could appear in every examination paper, or nearly every examination paper, in one form or another. It is therefore, essential that you have a good grasp of these key areas.

You are provided with a text for Financial Strategy but you should read around the subject. A list of suitable texts is included in the study guide and, additionally, you should read the Diploma Newsletter and the financial pages of the broadsheet newspapers. It is always dangerous to rely on a single source of knowledge for examination success.

The examination

You are probably already aware that the Module B examination paper covers both Financial Strategy and Risk Management and is divided into three parts. Part A of the examination paper contains 20 multiple-choice questions, of which 10 are based on the Financial Strategy syllabus. There will usually be a mix of computational and narrative Financial Strategy questions. However, these will not necessarily be in equal number and in most examinations there are likely to be more of the former than the latter. The nature of the subject makes computational questions a highly appropriate means of testing both knowledge and understanding. The style of multiple-choice question requires candidates to select one answer from a choice of four possible answers. Providing these questions are properly designed, the distractors (that is, the incorrect answers) will seem attractive. It is, therefore, vitally important that you read each question carefully before answering. There are traps waiting for the unwary!

Part B of the Module B examination paper contains three questions from the Financial Strategy area. Often these questions will be broken into two or three sections and there may well be both computational and discursive sections. The discursive sections are usually related in some way to the computational sections. For example, candidates may be asked to calculate the internal rate of return of a proposed project in one section and in a following section they may be asked to decide, giving their reasons, whether or not the project is worthwhile. In some cases, a question may be asked that does not involve any computation. Thus, candidates may be asked to critically discuss some issue, such as the advantages and disadvantages of a company obtaining a stock exchange listing. However, these types of questions may not appear in every examination paper and when they do there will usually be only one such question.

Section B of the pilot examination paper gives a flavour of what candidates might expect. It provides an indication of the style and approach that will be adopted. However, if you are looking for a little more help, the past Financial Management examination papers (Paper 3 of the Certified Diploma) provides some further examples of the style that will be adopted. When looking at these past papers, however, you must bear in mind that the syllabus for the new Financial Strategy paper is not identical to that for the old Financial Management paper. Thus, some question topics appearing in these past papers are no longer relevant. You should also bear in mind that Section B of the Module B examination paper contains questions that carry 20 marks rather than 25 marks, which is what past Financial Management examination questions carried.

Part C of the examination paper is devoted to Risk Management. There are no questions relating to Financial Strategy in this part. You are required to answer one question from Section B, one question from Section C and one question from either Section B or C.

A recurring problem in examinations is that some candidates find it difficult to manage their time effectively. This may be a particular problem with the introduction of a new examination paper and a new examination structure as there are no past papers that can be used to help sharpen examination technique prior to the real thing. However, you should try working through the pilot examination paper under examination conditions to see how you fare. The past Financial Management paper may also provide some help for Section B of the new examination, subject, of course, to the points made earlier.

The project

The project will take the form of a case study. The case study will usually be between three – six pages in length and will present candidates with a problem that must be solved. The problem will be open-ended and so there will be more than one way of tackling the problem and, therefore, more than one feasible solution. You should not think that the Examiner is looking for a single ‘correct’ solution. This is not the case: a variety of solutions may be acceptable. The process adopted in solving the case study problem is what is really important and so marks will be awarded for the quality of both the analysis and reasoning employed in arriving at the solution.

The pilot project that has been published is based around a financing problem. You should study the general approach adopted carefully. Note that answering this problem involves a combination of computational analysis and discussion. The problem reflects the real world, in as much that not all the information that you might like to have in order to conduct a more thorough analysis is available. This lack of information may make it necessary to be tentative in any conclusions that are made. In some cases, a lack of information may force you to employ assumptions in order to arrive at a solution. Where this is done, the assumptions should be clearly identified and should also be reasonable. You cannot simply ‘assume away’ any problems that have been mentioned.

Remember that there are certain basic rules that apply to all projects. Some of the more important are:

• Where your answer involves calculations being carried out, any formulae used or key workings should be included as part of your answer. The markers must be able to trace the main steps that you have taken towards a solution.
• Where recommendations are being made, they should be linked clearly to your analysis of the case problem. You should avoid producing recommendations at the end of a project that cannot be supported by earlier analysis and discussion.
• Ensure that your answer to the project is logically structured: it should have a beginning, a middle, and an end.

Although these rules may seem fairly obvious, they are often forgotten. Good luck and every success in your studies.

Dr Peter Atrill is Examiner for Paper D3

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