ACCA FM exam technique

How the FM exam is built

Financial Management is a three-hour computer-based exam worth 100 marks, with a pass mark of 50%. Section A has 15 two-mark objective-test questions (30 marks). Section B has three ten-mark objective-test cases (30 marks). Section C has two 20-mark constructed-response questions (40 marks), which the syllabus and study guide says will mainly come from working capital management, investment appraisal and business finance. You get a formulae sheet and tables of discount and annuity factors, and an extra ten minutes before the start to read the exam instructions.

The biggest single block is a 20-mark Section C question: at 1.8 minutes a mark, about 36 minutes including reading, planning and checking. The Section C questions in the examiner's reports mix calculation and discussion, and both reports point to the discussion as the weaker half.

Where FM candidates lose marks

• Bullet points where a discussion is required. "Brief bullet points consisting of only a few words do not comprise a discussion." The examiner quotes ACCA's definition from the article Answering the question: discuss means to "consider and debate/argue about the pros and cons of an issue". Asked to discuss the usefulness of ROCE, a response needed both sides.
• Defining instead of answering. Weaker answers "provided only a definition of hard capital rationing", or more reasons than asked, "barely discussed". Others "spent time defining ROCE and/or using numbers to illustrate it, neither of which were required".
• Listing ratio changes. On a fast-growing company, some candidates "simply listed ratio changes without interpreting their significance", and few defined overtrading or concluded clearly.
• Answering a neighbouring topic. Asked about funding working capital, a significant number of candidates discussed working capital management instead. The examiner's recommendation: "distinguish between management of working capital and financing of current assets."
• Repeating the formula sheet. For cash management models, it was not enough to restate the Baumol and Miller-Orr formulae already provided.
• Missing a condition in the scenario. Some candidates wrote "mutually exclusive" in their spreadsheet and then included both projects; others applied a factor's fee to receivables when the scenario said credit sales.
• Unstructured argument. In a ten-mark critical discussion of capital structure, "many scripts lacked clear introductions and conclusions", with ideas presented as unconnected statements.

The FM technique that works

1. Show the route in the spreadsheet. Label each cell and show workings, so method marks are available under the own-figure rule if a number is wrong. The examiner shows how SUM, a copied tax formula with the correct sign, and an NPV formula that separates time 0 from years 1 to 4 save time and improve accuracy.
2. Obey the scope instruction. When a requirement says "No calculations are required", do not recalculate receivables days to prove they rose; explain the likely cash-flow and credit-control implications instead.
3. Develop each point for its marks. For "Discuss TWO reasons" worth four marks, each reason needs about two marks of development: the point, why it matters, and what follows for this company. As general exam craft, write in short paragraphs, one point each, rather than single-line bullets.
4. Read the scenario's conditions before you calculate. Note mutually exclusive projects, which base a fee applies to, the cost of finance and the timing of cash flows. Several of the errors in the reports start here.
5. Conclude. Where the figures point one way, say so. The report on working capital expected "a reasoned conclusion supported by financial evidence", and in a longer discussion a brief introduction and short conclusion give the marker your argument.
6. Practise investment appraisal in the spreadsheet. The examiner notes that every recently published FM exam contains a question covering syllabus area D, Investment Appraisal, and recommends working through as many as possible "using the spreadsheet where appropriate".

Check your FM technique

The interactive check that follows turns these habits into FM-style choices: when a "discuss" requirement has been met, what to do when calculations are excluded, how to set out an NPV in the CBE spreadsheet. It scores habit by habit and saves your latest result on this device and to your account if you are signed in. Make your first run a true picture of how you work now. Read the debrief, focus on the weakest habit, and retake.

Before the exam

In the last week, complete an investment appraisal question and a working capital question on the ACCA Practice Platform using the spreadsheet, under time. On the day, check your exam docket, use the instruction-reading time to settle, and set a finish time for each Section C question before you start Section A.