F9 Financial Management

An Introduction

What is F9 all about?

1 An introductory financial management paper

2 Some link to F2 management accounting

3 Examines both computational and interpretational skills

F9 Financial management
Syllabus areas

1. Financial management function

2. Financial management environment

3. Working capital management

4. Investment appraisal

5. Business finance

6. Cost of capital

7. Business valuation
8. Risk management
 F9 Formula Sheet

Economic Order Quantity

2C0D
= CH

Miller-Orr Model

Return point = Lower limit + (1/3  spread)

1
3 3
 4  transaction cost  variance of cash flows 
 
 interest rate 
Spread = 3  

The Capital Asset Pricing Model

E(ri) = Rf + ßi (E (rm) – Rf)

The Asset Beta Formula

 Ve   Vd(1 T) 
 e   d 
ßa =  (Ve  Vd(1 T))  +  (Ve  Vd(1 T)) 

The Growth Model

D0(1 g) D0(1 g)
P0 = (Ke  g) or P0 = (re  g)

Gordon’s Growth Approximation

g = bre

The weighted average cost of capital

  Ve   Vd 
   
WACC =  Ve  Vd  ke +  Ve  Vd  kd (1–T)

The Fisher formula

(1 + i) = (1 + r)(1 + h)

Purchasing Power Parity and Interest Rate Parity

(1 hc ) (1 ic )
S1 = S0   hb )
(1 F0 = S0   ib )
(1

F9 Exam format

F9 is assessed by a three hour paper-based examination plus 15 minutes reading

time.

The examination consists of 4 questions of 25 marks each. All questions are

compulsory.

Questions normally have 2 or 3 syllabus topics within them

How to pass F9

1 Understand the theoretical foundation of each syllabus area

2 Be able to apply all formulae in the formula sheet and other computations as
required

3 Be able to interpret the requirements of exam standard questions

4 Practise exam questions in a timed exam environment