Examiner’s Approach Interview: P4 - Advanced Financial Management
Interviewer: Welcome to the P4 Examiner’s Approach interview.
The following is an Examiner’s Approach interview for Paper P4,
Financial Management.
The content of this interview has been prepared by the examiner,
working with the Qualifications team at ACCA, and is presented by
actors representing an interviewer and the examiner in discussion.
For more detail on the examiner’s approach, please see the article
produced by the examiner in the May 2007 edition of student accountant.
The examiner is Bob Ryan. Bob has many years of business and
lecturing experience. He is professor of financial management at a
UK university and also a visiting fellow at a number of universities.
He has authored many books in finance and accounting and has
long experience in education, training and consultancy.
Interviewer: I suppose it would be most appropriate to start off by asking where
P4 fits within the overall structure of the ACCA Qualification.
Examiner: The Professional Level of the ACCA qualification syllabus is divided
into two modules – Essentials and Options, with Essentials coming
before Options. Both these modules have been set at an
intellectual level equivalent to that expected of a student taking a
Masters degree.
The focus of the syllabus at the Professional level is to build upon
the technical skills already acquired, and to explore more advanced
professional techniques, skills and values which are required by
the expert accountant acting in an advisory or consultancy role at a
senior level.
Studying P4 as an Options paper will allow the student to
specialise their expertise in this area drawing upon knowledge
obtained from studying the underpinning F9, Financial
Management in the Skills module and from the P1, Professional
Accountant paper.
Interviewer: From what you have just said, P4 is connected to other papers
within the ACCA Qualification. What are the links with other
papers, or with other components?
Examiner: F2 is where students will encounter some of the first principles and
fundamental techniques of financial management, particularly the
relevant mathematical and statistical tools. But P4, mainly builds
on F9, Financial Management capabilities. Students are therefore
expected to have a thorough understanding of the F9 syllabus
before they choose the P4 options paper.
In addition, P4 builds indirectly on P1, Professional Accountant.
This is particularly the case in the areas of corporate governance
such as strategic planning and the ethical aspects of director
remuneration. P4 focuses more specifically on the financial aspects
of risk management, introduced at a broader level in P1.
P4 is one of the last papers to be examined within the structure of
the qualification, therefore the learning outcomes of P4 are not
developed further within the education curriculum.
However, the knowledge and capabilities acquired in P4 will be
applied in context within the Practical Experience Requirements.
The specific Performance Objectives relating to P4 are
Performance Objectives 15 and 16.
Interviewer: What is the overall concept or theme for P4 as a paper?
Examiner: P4 is a paper which is mainly about the skills and knowledge
required of a practicing financial manager operating at a senior
level. It is based primarily on the idea that companies exist in the
context of globalised markets which are characterised by risk. By
this we mean companies need to be able to adapt financially to
rapidly changing circumstances and opportunities.
P4 is therefore concerned with exploring how to make sound
financial judgements based upon evidence and how to
communicate those judgements persuasively.
The following quote sums up this idea.
‘To decide we need information, to judge we need wisdom.’
This quote nicely sums up the notion that having knowledge is one
thing, but using it wisely to make appropriate decisions in financial
management is another. It also emphasises the professional level
of the paper and the fact that professionals are more than mere
technical experts.
Interviewer: Are there any other broad themes which run through the P4
syllabus?
Examiner: Yes, as previously mentioned, P4 is essentially about the work of
the financial manager within a large organisation. It has relevance
for the small business practitioner or manager as well.
Theme 1 covers the process of choosing and costing the financial
resources of the firm. In this we have moved on from a
preoccupation with the equity markets to focus as much on debt in
all its different forms.
Theme 2 is about valuation. In this we focus on the optionality
which lies at the centre of all financial valuation: investment
appraisal and real options, the value of the firm as an option
against the underlying assets of the business as well as the
classical techniques of DFC, NPV, cash flow valuation and so on.
Theme 3 looks at mergers and acquisitions. Large corporate deals
bring together many areas within this and other syllabuses: due
diligence; valuation; business strategy; corporate governance and
the management of risk.
Theme 4 is about corporate reconstruction and focuses on the
problems of turnaround, corporate unbundling, outsourcing and
alternative governance structures.
Theme 5 recognises that without risk there is no profit, the fact
that companies have to identify the nature of the risk they are
dealing with and how it can be exploited and managed.
Interviewer: The syllabus for P4 is structured into seven main sections. Can you
briefly explain the main content of these syllabus sections?
Examiner: The first syllabus section (A) introduces the role of the senior
financial executive or advisor and the responsibility towards stakeholders.
In Section B, the advanced aspects of investment appraisal are
covered. This is a development of what was introduced in paper
F9, Financial Management.
Students are introduced to acquisitions and mergers, a commonly
pursued growth strategy, in Section C. This section includes the
advanced issues surrounding the valuation and financing of acquisitions.
Section D covers the area of corporate reconstructions and reorganisations.
Section E covers treasury and advanced risk management. Again,
this is an area which is introduced in F9, Financial Management
but in P4, it focuses on the more complex hedging instruments,
including derivatives.
Section F focuses on the economic environment in which
multinationals operate and the strategies they pursue to achieve growth.
Section G deals with emerging issues. Financial Management is a
rapidly changing field. The 2007 credit collapse has demonstrated
how quickly the financial landscape can change. student
accountant has articles touching upon methods and issues where
students can keep up-to-date. Although the study texts provide the
essential elements, students are encouraged to read widely,
focusing on good quality financial newspapers, magazines and
journals and relevant websites such as www.CFO.com and
www.FT.com.
Interviewer: Thank you for explaining the main content of the syllabus for us.
What can you tell us about how the exam itself is structured?
Examiner: As with all papers at the Professional level, the writing time for this
exam is three hours. All ACCA three hour papers have been
allocated an additional 15 minutes reading and planning time,
within which students can read the paper, understand the
requirements and choose which questions to answer. An articleexplaining how this time should be productively used has been
published in the student accountant magazine in the August 2007
edition which can be seen on the website.
Interviewer: What exactly can students do in reading and planning time?
Examiner: They can make notes and plan answers. This may only be done
on the question paper and not on the answer booklet. The answer
booklet cannot be used until the exam begins.
Interviewer: What kind of questions will appear in the exam and is there any
choice?
Examiner: As can be seen here, the exam is divided into two sections, A and B.
Section A contains two case study questions totalling 50-70 marks
between them – normally 30 marks each. These case studies can
potentially assess any area across the syllabus, and may typically
assess capabilities from several sections.
Section B contains three 15-25 mark questions (each one is
normally 20 marks) which are much shorter scenarios. Each
Section B question will normally assess one discrete section of the
P4 syllabus and at least one will be wholly discursive.
The student must answer two from the three questions from the
optional Section B.
For more information about the exam itself and how it is structured
there is a pilot paper and past exam paper available on the ACCA website.
Interviewer: How should students deal with a requirement that asks the
candidate to do something AND something else?
Examiner: Because some questions may ask the candidate to do something
‘and’ something else, the candidate may have to use judgement to
decide how much effort to devote to each aspect. This will be
based on the difficulty of different cognitive levels, for example
‘describe’ is usually easier than ‘assess’. However, markers will be
asked to exercise quite a lot of flexibility in awarding marks in this situation.
Interviewer: What are professional marks?
Examiner: Between 4 and 6 professional marks will be awarded within
Section A for the form and tone of an answer, for its structure and
for the strength and persuasiveness of arguments put forward.
There is an article which was published in the October 2007
edition of student accountant explaining what professional marks
are awarded for. This article will give more information on the
awarding of these marks.
Interviewer: What advice would you give about revising effectively for, and
passing, P4?
Examiner: The key tactics to employ are:
• Avoid spotting questions using past papers – look for
contemporary issues and themes.
• Practice past questions to build speed and computational accuracy
• Try to obtain a broad understanding of the syllabus and how the
different financial topics interrelate
• Make sure that you can use all the quoted formulas and know
the assumptions on which they are based
• Remember, I place emphasis on options, mergers and
acquisitions and on the broader aspects of the financing decision.
Interviewer: What is most important during revision?
Examiner: Remember that effective revision involves plenty of question
practice. There is no substitute for applying knowledge to
situations and using that knowledge within real business contexts
as can be found in the pilot paper and in exam style questions. It is
also worth dissecting relevant media news stories and applying this
form of analysis to these situations.
Interviewer: How important would you say time management is?
Examiner: Very important. Students must try and ensure that they manage
their time effectively, both during revision and the examination
itself. Spending too long revising detailed areas of the syllabus is
less productive than developing a proper understanding of the main
principles, ideas and concepts within each syllabus section and
subject area. Remember that students should maximise their
potential for earning marks and spend their time in proportion to
the marks available – then move on.
Interviewer: What else would you say students need to remember during the
exam itself?
Examiner: Students must ensure that they apply their knowledge and
understanding to the case or scenario provided, where this is required.
At this level of exam, most marks will be available for application
and analysis, for assessing a situation, using judgment or for
developing points and arguments. This also applies to professional
marks which were referred to earlier.
Interviewer: What do you believe to be the main potential pitfalls in preparing
for and taking the P4 exam?
Examiner: Students continue to believe that possessing detailed knowledge is
the key to exam performance. This is true to some extent, but the
highest marks are awarded for those who use their knowledge in
the proper context. The main pitfall here is that students feel the
need to demonstrate their knowledge, whether required or not. It is
because of this that many students fail to complete the exam.
Remember that writing 10 good points for a five mark requirement
is a 50% waste of effort.
Interviewer: Do students get rewarded for including bullet lists and diagrams?
Examiner: Very few marks are available for demonstrating knowledge in a
vacuum or for bullet lists or for diagrams. If a diagram is included
it should be properly explained. Candidates should ensure that
every point made refers directly or indirectly to issues within the
question requirement or to information made available. For this
they will be well rewarded.
Interviewer: Are organisational skills important in the exam?
Examiner: Yes, very much so. Students must try to ensure that they are
disciplined in answering questions once they have chosen which
questions to answer. Although they can answer questions in any
order, they should try and answer each part of a question in the
order written and keep them together on the answer script.
Interviewer: It is clearly important to follow the above tips and avoid any
common pitfalls in exam revision and performance. What further
information about student performance would you give which
might help students prepare for exams?
Examiner: After each examination session, all ACCA examiners are required to
produce an exam report. These reports highlight key issues arising
in the last exam and focus on where students performed
particularly well or badly. These are published in February and
August and can be found under paper resources for each paper
which can be accessed through the website.
In addition, after each exam session has been completed, the exam
review board meets. This is a board consisting of ACCA internal
Education staff and six representative members of the approved
learning partner community. Minutes from this board summarise
the comments made by tuition provider representatives, report
survey results about the exams from student questionnaires and
detail the responses. Again, the minutes from the exam review
board are available on the website.
Interviewer: And finally, what would be your concluding advice about the P4
examination paper?
Examiner: Firstly, students must always read the question as carefully as they
can; identifying clearly the instructional verbs contained within
each requirement.
Second, it is important to properly understand the requirements,
assessing how much the examiner is really looking for in each
question part. Students should also be fully aware of the marks
available for each requirement.
And finally, don’t forget that answers given should relate to the
question actually asked, not the one that a candidate would have
liked to answer!
Interviewer: Thank you very much for sharing your insight into this exam paper.
I’m sure it has given students and tutors lots of useful information.
Examiner: Thank you.
