Exam Unit: Strategic Financial Planning (4.2)

Learning Outcome

To demonstrate an understanding of contemporary thinking on strategic financial management. To be able to utilise the tools, evaluate strategic financial options, and evaluate and propose financial strategy for the enterprise.

Formulation of Financial Strategy:
1. Objectives of profit-making entities
2. Objectives of not-for-profit organisations
3. Public and private – similarities and differences
4. Assessing attainment of financial objectives
5. The three key decisions of financial management
6. Policies for distribution of earnings
7. Developing financial strategy in the context of regulatory requirements
8. Major economic issues
9. Modelling and forecasting cash flows and financial statements
10. Current and Emerging issues in financial reportingFinancial Management:
1. The treasury function
2. Financial markets
3. Share price volatility
4. The efficient market hypothesis
5. Investor ratios
6. Working capital management strategiesSources of Long-term Finance:
1. shareholders’ funds
2. Raising share capital – the stock market
3. Debt finance
4. Medium-term financing
5. Financing of small businesses

Capital Structure and Cost of Capital:
1. Measuring gearing
2. Cost of capital
3. Weighted average cost of capital
4. Marginal cost of capital
5. The traditional theory of gearing
6. Modigliani and Miller’s theories of gearing
7. Cost of capital and adjusted cost of capital
8. Risk and reward
9. Portfolio theory
10. The capital asset pricing model
11. Using the CAPM as an investment tool
12. MM, CAPM and geared betas
13. Use of CAPM in investment appraisal
14. Arbitrage pricing model

Business Valuations:
1. Methods of company valuation
2. Business valuations and efficient markets
3. Intellectual capital
4. The impact of changing capital structure
5. Recognition of the interest of different stakeholder groups in company valuationsMergers, Acquisitions and Buyouts:
1. Terminology and types of merger
2. The reasons for merger or acquisition
3. Defences against takeover
4. Methods of payment for an acquisition
5. The post-merger or post-acquisition integration process
6. Reasons why merges and acquisitions fail
7. Management buyouts
8. MBOs and other forms of reconstructionInvestment Appraisal Techniques:
1. Accounting rate of return
2. Payback
3. Discounting techniques
4. Capital rationing
5. Annual equivalent cost

Advanced Investment Appraisal Techniques:
1. Taxation
2. Inflation
3. Working capital
4. Identification of a project’s relevant costs and benefits
5. Linking investment in IS/IT with strategic, operational and control needs
6. Adjusting for risk
7. Evaluating and reporting investment opportunities
8. Adjusted present value
9. Assessing investments as options
10. Project implementation and control
11. Post-completion auditing

Financing and Appraisal of Overseas Operations:
1. Financing overseas operations – a global strategy
2. The effect of restrictions on remittances
3. the Euromarkets
4. The effect of taxation
5. International capital budgeting
6. APV method