Approach to the new style Foundations in Financial Management exam

December 2019 will be the first Foundation in Financial Management (FFM) exam of the new syllabus and the first ever computer based FFM exam. This article aims to brief candidates as to what to expect as the exam moves to CBE and on the functionality of computer software they will use in the exam.

Structural changes to the exam

While there are no changes to the FFM syllabus from December 2019 there are changes to the structure of the exam.  The number of multiple-choice questions (MCQs) has increased in Section A and Section B has more, albeit shorter, constructed response questions. The detailed structure of the exam is as follows:

Section A
This section will consist of 15 MCQs, where there is one correct answer from four possible answers. All questions are compulsory and will be worth 2 marks each.

Section B
This section will consist of 7 constructed response (longer-form) questions. All questions are compulsory and the total marks for each constructed response question will range from 5 to 20 marks.

Question one will be based on a detailed scenario and will typically have two or three separate requirements. This question will be predominantly application focused and worth 20 marks in total.

Questions two, three, four and five will be predominantly knowledge-based questions without a detailed scenario.  Each question will be worth 5 marks.

Questions six and seven will typically contain detailed scenarios and have one or two requirements. These questions will be worth 15 marks each.

The exam must be completed within a two-hour time period and there is no additional reading time. All syllabus areas will be examined in every exam and the mix of marks for discussion and calculations in each exam will be approximately 50:50. Discursive questions will continue to be largely knowledge based and candidates will be expected to be able to explain the advantages and disadvantages or the main features of a technique, model or process. However occasionally candidates may also be required to comment on the suitability of a technique to a specific set of circumstances.

Computer-based exam guidance

The FFM exam will be sat as a computer-based exam and all questions in section B will be answered using either a word processing or spreadsheet response, which will be prescribed by the examiner. This will be a new experience for candidates, and it is important that all who sit this exam are aware of: how the screens will appear, where the questions are located, how to access the help/resources and how to input the answer. Every candidate who sits the FFM exam from December 2019 onwards should access the specimen exam which will allow them to familiarise themselves with the software that the live exam uses (see 'Related links').

It is recommended that all candidates revisit this specimen exam frequently during their studies to become familiar with the functionality of the exam software, as well as the question subject areas. FFM will not examine a candidate’s computer skills, but to arrive at this exam without practice will probably be a disadvantage. No one would bring a new calculator, where the buttons are in different places to their old calculator, to an exam without practising with it first and the same principle applies here. The key points that candidates should be familiar with are explained in the remainder of this article, but it cannot be emphasised enough that candidates must practise answering the specimen exam questions using a computer.

The first screens that candidates will see in the exam are the instruction screens, These screens explain how to: navigate between screens and questions, use the help/resources and end the exam. Although, as previously stated, there is no reading time, there will be a 10-minute period at the start of the exam where candidates can read these instructions before the two-hour exam time begins.

Once a candidate begins the exam, section A questions will appear first. The screen and question will look like this.

The top right-hand corner indicates the question number but also a, 'Flag for Review' button. This button allows a candidate to flag any question that they are unsure about and then, time allowing, they can return easily to any flagged questions later in the exam. All MCQs answered are worth 2 marks if correct and 0 marks if incorrect. Please note workings are not marked.

On the top left-hand corner there will be a 'Scratch Pad' and 'Calculator'. The scratch pad is simply a drop down note pad that can be used to jot down any notes (candidates will also have scrap paper provided for this purpose). However, candidates should be aware that anything written on the scratch pad will NOT be marked. Although workings for MCQs are not marked, workings and notes for Section B questions are always reviewed if they are entered in to the response area for the question to which they relate.

The calculator function can be set to standard or scientific mode and can be accessed at any time during the exam. Candidates can use their own calculators in the exam and if they plan to use the calculator supplied in the software, they are advised to practise using them before the live exam.

The 'Explain Answer' button in the specimen exam causes a pop-up box with the rationale for the answer or the model answer to appear on-screen. This button will not be available during live exams.

For the MCQ shown in the image above, we must calculate the cash operating cycle which is: receivable days plus inventory days less payable days. These days are calculated as follows:

  • Receivables days = ($23,000/$210,000) x 365 = 40 days
  • Inventory days = ($14,000/$175,000) x 365 = 29 days
  • Payables days = ($16,000/$175,000) x 365 = 33 days

Therefore, the cash operating cycle is 40 days + 29 days – 33days = 36 days.

To register the answer to the question, move the cursor to the circle to the left of the correct answer and left click the mouse. This will colour the circle black and record the selected answer. Candidates can change their minds as often as they like but can only opt for one answer at a time. It is poor exam technique to leave an MCQunanswered Candidates are advised to always have an educated guess.

The bottom of the screen looks like this.

For Section A, the button in the bottom left hand corner titled 'Help/Maths Tables' will retrieve the formula sheet and the discount and annuity tables, as well as the exam instructions. The buttons in the bottom right hand corner will navigate between the questions. If a candidate has applied the Flag for Review to a question then when they click on Navigator, it will show that question as flagged.

The Section B questions follow the Section A questions, although candidates can choose to answer questions in any order.

Section B questions appear like this.

As can be seen above, the buttons already described appear the same, but the screen for this question is split vertically.

The detailed scenario is on the left-hand side of the screen, the requirement and available marks are at the top of the right-hand side of the screen and the response area for the answer is below the requirement. As this question is quite long candidates cannot see the entire scenario on the screen at the same time but can use the scroll bars to view the full screen. Candidates should not worry that they could miss information in the scenario as a warning box appears if the full screen is not viewed.  

In the live exam candidates must enter their answer for each question requirement in the response area provided for that question. In the case of the requirement above this is a spreadsheet, but for other response areas it could be a word processing response. Any answers entered in a response area provided for a different question will not be marked.

When using the spreadsheet, it will be useful to candidates to use the spreadsheet functionality. Detailed guidance for spreadsheet (and word processor) functionality can be found by clicking the 'Help/Maths Tables' button at the bottom left hand corner. Perhaps the most useful function for FFM will be the =SUM function. In the partially completed answer below the net cash flows in column B have been totalled by typing =SUM(B2:B6) into cell B7. This has then been copied into cells C7 to E7 by dragging the formula across from B7 or using the cut and paste icons, which can be seen in the spreadsheet toolbar. Once candidates are competent with this function totalling long columns of figures can be done without error in mere moments. A further benefit is that any errors in a figure within a column can be corrected and the net cash flow total will correct automatically.

In this answer, there is reference to the workings for the old machine (W1) and new machine (W2), although these workings are not visible in this screen shot, they are contained in the spreadsheet response area and are available for the marker to check. Candidates are reminded that they must show ALL workings or risk losing marks. With this point in mind spreadsheet answers can be superior to paper-based answers. For example,  take the income figures of $5,000, $15,000, $37,500 and $67,500 in the answer below. These figures are 4%, 12%, 30% and 54% respectively of $125,000. If =125000*.04 is typed into cell B2 the cell will show 5,000. If an error is made and a candidate misreads $125,000 for say $135,000 all the answers will be wrong, if $135,000 is applied consistently, but because the workings shown in the cell ($135,000*.04 for B2) will be visible to markers, some marks can be awarded. These marks could not be awarded if an incorrect answer was worked out on a calculator and typed into the cells and no workings shown.

Shorter discursive questions are likely to appear with the requirement above the response area. Candidates simply have to type in their answers in the given response area which will be a table structured for the answer expected from the students such as this.

As this question is asking for FIVE functions, each function should be typed into the blank rows provided in the table. The rows will automatically expand if a candidate writes a long answer and all of this answer will be marked. However, candidates must not add extra rows and provide more points than asked for as this is a waste of their exam time. For example, in this example, if a candidate lists seven functions only the best five will be marked.

Not all word processing requirements will have a table to type into like this one, often there will be a blank document to type into. Candidates should not waste time making the answers appear well presented by changing to italics, underlining or using the bold function. At this level markers are looking for competence with the subject and not word processing/spreadsheet abilities and there are no marks available for formatting. However candidates should remember to put their points in separate paragraphs or use bullet points.

Candidates should also be aware that there is no negative marking, the marking team mark what is correct and do not deduct marks for what is wrong. Therefore, candidates should think very carefully before they strike out any part of their answer, as once this is done and submitted it is instructing markers to ignore it. It is often safer to leave all notes and workings for a marker to review, especially for the longer Section B questions, as if there is any merit in them the marker will award marks.

Written by a member of the FFM examining team