This presentation reviews the examination sessions from June 2013 to December 2014 inclusive, for the P4 paper: Advanced Financial Management. It highlights the main areas of the P4 paper syllabus, the general pass rates, the areas where the candidates performed well, the areas where the performance of candidates was not adequate, possible reasons behind poor performance and what the learning providers can do to help improve future performance. At the end of the presentation, there will be an opportunity to ask questions related to areas of the syllabus and on the presentation. 1 The P4 paper’s syllabus is divided into seven sections. Please refer to the detailed syllabus and study guide for the details of each section. The structure of the syllabus is as follows: Section A considers the role of the senior financial executive/advisor, formulation of financial strategy, responsibility to stakeholder, and ethical and environmental issues. Section B considers the multi-national environment and conducting business in an international environment. Section C considers advanced investment appraisal and develops the ideas introduced in paper F9, Financial Management. A sound knowledge of paper F9 is therefore a pre-requisite for paper P4. Section D considers the area of acquisitions and mergers (M&A), including M&A strategy, valuation, regulatory framework and financing. Section E considers corporate reconstruction and re-organisation Section F considers the area of treasury and advanced risk management 2 techniques Section G considers emerging issues in finance and financial management 2 Section A: Mixture of written and computational elements in the question. 4 professional marks, will require a formal structure and presentation to a part of the question. A range of syllabus areas will be tested but the question will largely be based on one main syllabus area. Section B questions: Normally mixture of computational and written elements in each question. Sometimes can be wholly written, based on knowledge and its application e.g. June 2014, Q4 on options, or analytical/evaluative based on data that is already provided. 3 The number of candidates taking the P4 examination is increasing every sitting. The overall pass rates have ranged between 33% and 42% since June 2013. 4 Point 1 Thorough and sustained preparation to gain adequate knowledge. Augmented with wider reading of financial articles and books, and a good understanding of the underlying knowledge gained from the F9 paper. All papers, June 2013, Dec 2013, June 2014 and Dec 2014, test a range of syllabus areas and often more than one area of the syllabus, especially in question one. For example, June 2013, Q1 tested valuation, impact of project on valuation, debt value and ethical issues; Dec 2013, Q1 tested the international environment, a global company and real options. Better prepared candidates would have acquired the knowledge to answer the range of areas tested through sustained study. Point 2 Ability to apply knowledge to the requirements of each question. For example: In June 2013, Q2, the better answers linked synergy benefits to the question. In the December 2013 exam, Q3 required a discussion of the financing a possible acquisition, stronger answers related their discussion on 5 the range of financing options to the company in the question and not as abstract concepts. In June 2014, it was pleasing to see many answers provide an in-depth discussion of APVs versus NPV for Q2. In the Dec 2014 paper, many responses to Q3b) which asked students to compare the results of NPV, IRR, MIRR and value at risk were good. Point 3 In every P4 paper, students faced time pressure in the exam. And a well- crafted strategy aimed at maximising marks would go a long way to achieving a pass. For example, in Dec 2014, candidates who did the relatively easier section B first were more likely to pass. It is recommended that reading time should be used to plan how the paper will be tackled. 5 Point 1 Adopt a systematic approach, for example, in December 2014, better responses dealt with each part of question 1 in turn and putting the numerical results in a table for analysis. In the same paper, in Q4c), the better answers presented ratios and trends separately and then provided a holistic discussion based on these, instead of analysing each ratio in turn and in isolation, and thus missing the broader corporate strategy. Point 2 Answering all parts of the question fully. Many responses, for example, in questions related to risk management, calculate the results of hedging strategies and then analyse and interpret the results. Allocating and spending time in answering each part and sub-part of a requirement is more likely to yield a pass. Point 3 An organised approach and a good structure to the answer. Well presented answers, even where there are no professional marks allocated to the question, gives the marker confidence that the student understands the 6 requirements of the question. In this case, even if the answer contains small mistakes, it will gain the majority of the marks. Point 4 Good time management allows an effective attempt to be made for each part of each question. Most of the P4 papers require a substantial amount in each question and the well prepared candidates demonstrate their ability to manage their time between questions and parts of questions so that they are able to make a good attempt at all the parts and sub-parts of all the questions. 6 Point 1 Over reliance placed on past papers and intensive study programmes. Too much reliance was sometimes put on past papers as an indicator to future questions. Questions are unlikely to be the same as past questions. Sometimes candidates placed too much reliance on intensive study programmes but to succeed at P4 requires thorough preparation over a longer period of time so that adequate knowledge and understanding can be gained. For example, in the December 2013, in Q3c), many candidates suggested using Islamic finance to fund an acquisition. Here it appeared that candidates were trying make their knowledge fit to a question. This is a symptom of an intensive and last-minute, but ultimately flawed, study programme/strategy. Point 2 Making basic errors in calculations, For example, in Q1 of he December 2014, many candidates made an error in the timing of the offer from Lumi Co because they had not read the question carefully. 7