Competency Standard
F9: Financial Management

Introduction

Financial Management is designed to equip candidates with the skills that would be expected from a finance manager responsible for the finance function of a business. The paper, therefore, starts by introducing the role and purpose of the financial management function within a business. Before looking at the three key financial management decisions of investing, financing, and dividend policy, the syllabus explores the economic environment in which such decisions are made.
The next section of the syllabus is the introduction of investing decisions. This is done in two stages - investment in (and the management of) working capital and the appraisal of long-term investments.
The next area introduced is financing decisions. This section of the syllabus starts by examining the various sources of business finance, including dividend policy and how much finance can be raised from within the business. Cost of capital and other factors that influence the choice of the type of capital a business will raise then follows. The principles underlying the valuation of business and financial assets, including the impact of cost of capital on the value of business is covered next.
The syllabus finishes with an introduction to, and examination of, risk and the main techniques employed in the management of such risk.

Underlying Knowledge

A Financial management functions

1. The nature and purpose of financial management
2. Financial objectives and relationship with corporate strategy
3. Stakeholders and impact on corporate objectives
4. Financial and other objectives in not-for-profit organizations

B Financial management environment

1. The economic environment for business
2. The nature and role of financial markets and institutions

C Working capital management

1. The nature, elements and importance of working capital
2. Management of inventories, accounts receivable, accounts payable and cash
3. Determining working capital needs and funding strategies

D Investment appraisal

1. The nature of investment decisions and the appraisal process
2. Non-discounted cash flow techniques
3. Discounted cash flow (DCF) techniques
4. Allowing for inflation and taxation in DCF
5. Adjusting for risk and uncertainty in investment appraisal
6. Specific investment decisions (lease or buy; asset replacement, capital rationing)

E Business finance

1. Sources of, and raising short-term finance
2. Sources of, and raising long-term finance
3. Internal sources of finance and dividend policy
4. Gearing and capital structure considerations
5. Finance for Small and Medium-size Entities (SMEs)

F Cost of capital

1. Sources of finance and their relative costs
2. Estimating the cost of equity
3. Estimating the cost of debt and other capital instruments

Performance Criteria

1. Discuss the role and purpose of the financial management function
2. Assess and discuss the impact of the economic environment on financial management
3. Discuss and apply working capital management techniques
4. Carry out effective investment appraisal
5. Identify and evaluate alternative sources of business finance
6. Explain and calculate the cost of capital and the factors which affect it
7. Discuss and apply principles of business and asset valuations
8. Explain and apply risk management techniques in business.

Assessment Methods

• Testing of underlying knowledge through online written or oral examinations. The examination procedure will be recorded.
• Proceedings of projects or solutions to problems based assignments will be recorded as multimedia presentations or demonstrations, and organized as a portfolio for assessment.

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