CDipFM Syllabus

Paper 3 - Financial Strategy 

The Syllabus outlines the content of the paper and how that content is examined.

Financial strategy involves, amongst other things, allocating, managing and funding resources. As financial decisions frequently involve considerable amounts of money, it is important to consider, and understand the consequences of, various options that may be available. As the environment in which financial decisions are made is constantly changing, those involved in making such decisions must be aware of what might happen if different circumstances prevailed.

AIM

This paper provides insight to the world of financial strategy - when, how and where finance should be raised, which method(s) of financing should be used, which projects are worth undertaking, how to minimise working capital investment and how to value businesses.

CONTENT

Raising Finance

  • debt finance and equity finance (short, medium and long term)
  • global financial markets
  • market for corporate control
  • risk associated with different types of finance
  • evaluating financing decisions
  • the cost of capital
  • classes of shares - including use of warrants and convertibles
  • redemption and repurchase of shares
  • the effect of different methods of finance on stock market ratios
  • PFI/PPP

Investment Appraisal Techniques

  • Net Present Value, Internal Rate of Return, Accounting Rate of Return, Payback, Discounted Payback, Profitability Index
  • advantages and disadvantages of each technique
  • impact of inflation and taxation
  • sensitivity analysis
  • qualitative factors

Working Capital Management

  • monitoring and controlling investment in working capital
  • financial implications of working capital policies
  • risk associated with incorrect levels of investment in working capital

Mergers and Acquisitions

  • reasons for acquisitions and mergers
  • basic valuation techniques
  • alternative forms of consideration

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