http://freeaccastudymaterial.blogspot.com/ / t.c om sp o og bl ter ial dy ma stu Practice & Revision Kit Look inside ac ca Paper P4 Advanced Financial Management Practice & Revision Kit for exams up to June 2015 Free access to our Exam Success site htt p:/ June 2014 £18.00 ACCA Approved /fr ee BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia • Banks of questions on every syllabus area • Answers with detailed guidance on approaching  questions • Three mock exams with full answers and guidance For exams up to June 2015 Contact us One of a suite of products supporting Paper P4 Advanced Financial Management, for use independently or as part of a package, this Kit is targeted at ACCA’s exams up to June 2015 and contains: Practice & Revision Kit Paper P4 Advanced Financial Management This Kit provides material specifically for the practice and revision stage of your studies for Paper P4 Advanced Financial Management that has been comprehensively reviewed by the ACCA examining team This unique review ensures that the questions, solutions and guidance provide the best and most effective resource for practising and revising for the exam Advanced Financial Management BPP Learning Media is dedicated to supporting aspiring business professionals with top-quality learning material as they study for demanding professional exams, often whilst working full time BPP Learning Media’s commitment to student success is shown by our record of quality, innovation and market leadership in paper-based and e-learning materials BPP Learning Media’s study materials are written by professionally qualified specialists who know from personal experience the importance of top-quality materials for exam success ACCA P4 ACCA approved content provider ACCA APPROVED CONTENT PROVIDER http://freeaccastudymaterial.blogspot.com/ ACP4RK14.indd 1-3 30/05/2014 15:55 co m/ http://freeaccastudymaterial.blogspot.com/ log sp o t P R A C T I C E l.b PAPER P4 ym ate ria ADVANCED FINANCIAL MANAGEMENT tud BPP Learning Media is an ACCA Approved Learning Partner – content for the ACCA qualification This means we work closely with ACCA to ensure our products fully prepare you for your ACCA exams as In this Practice and Revision Kit which has been reviewed by the ACCA examination team, we: Discuss the best strategies for revising and taking your ACCA exams  Ensure you are well prepared for your exam  Provide you with lots of great guidance on tackling questions  Provide you with three mock exams  Provide the ACCA exam answers as well as our own for selected questions ea cc  htt p:/ /fr e Our Passcard and i-pass products also support this paper FOR EXAMS UP TO JUNE 2015 http://freeaccastudymaterial.blogspot.com/ & R E V I S I O N K I T log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ l.b First edition 2007 Eighth edition June 2014 ria ISBN 9781 4727 1110 (previous ISBN 9781 4453 6654 8) e-ISBN 9781 4727 1174 www.bpp.com/learningmedia We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the practice answer bank have been prepared by BPP Learning Media Ltd, except where otherwise stated © BPP Learning Media Ltd 2014 /fr e ea cc as Printed in the United Kingdom by tud BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA RICOH UK Limited Unit Wells Place Merstham RH1 3LG All our rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd ym Published by ate British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library htt p:/ Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable, sustainable sources ii http://freeaccastudymaterial.blogspot.com/ Contents co m/ http://freeaccastudymaterial.blogspot.com/ Page Finding questions log sp o t Question index v Topic index viii Helping you with your revision ix Revising P4 l.b Topics to revise x Question practice x Passing the P4 exam xi Exam formulae xv Exam information xvii Useful websites xix Questions and answers ria Questions Answers 101 ate Exam practice Mock exam  Questions 385  Plan of attack .393  Answers .395 ym Mock exam  Questions 417  Plan of attack .425  Answers .427 tud Mock exam (December 2013)  Questions 445  Plan of attack .453  Answers .455 as ACCA's exam answers  June 2013 469  December 2013 479 htt p:/ /fr e ea cc Mathematical tables and formulae 491 Review Form iii http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ A note about copyright Dear Customer What does the little © mean and why does it matter? log sp o t Your market-leading BPP books, course materials and e-learning materials not write and update themselves People write them: on their own behalf or as employees of an organisation that invests in this activity Copyright law protects their livelihoods It does so by creating rights over the use of the content Breach of copyright is a form of theft – as well as being a criminal offence in some jurisdictions, it is potentially a serious breach of professional ethics With current technology, things might seem a bit hazy but, basically, without the express permission of BPP Learning Media:  Photocopying our materials is a breach of copyright  Scanning, ripcasting or conversion of our digital materials into different file formats, uploading them to Facebook or emailing them to your friends is a breach of copyright l.b You can, of course, sell your books, in the form in which you have bought them – once you have finished with them (Is this fair to your fellow students? We update for a reason.) Please note the e-products are sold on a single user licence basis: we not supply ‘unlock’ codes to people who have bought them second-hand htt p:/ /fr e ea cc as tud ym ate ria And what about outside the UK? BPP Learning Media strives to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that If they act illegally and unethically in one area, can you really trust them? iv Finding questions http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ Question index The headings in this checklist/index indicate the main topics of questions, but questions are expected to cover several different topics Questions have been amended to reflect the new format of the exam from June 2013 Part A: Role and responsibility towards stakeholders log sp o t Questions set under the old syllabus Paper 3.7 – Strategic Financial Management (SFM) and Paper 14 – Financial Strategy (FS) are included as their style and/or content are similar to the questions that appear in Paper P4 – Advanced Financial Management Page number Marks allocation Mins Question Answer Preparation question: Shareholders and bondholders (6/03) 15 27 101 Multimedia company 25 45 102 Agenda for change (12/07, amended) 25 45 105 Solar Supermarkets (12/08, amended) 25 45 108 Preparation question: International corporate governance (SFM, 12/02) 15 27 110 25 45 112 25 45 115 25 45 118 25 45 120 25 45 122 25 45 124 25 45 10 126 13 World Trade Organisation (SFM, 12/05, amended) 25 45 11 129 14 Pharmaceutical Co (6/09, amended) 25 45 11 132 15 PMU (12/10, amended) tud Time 25 45 12 133 16 Jonas Chemical Systems 25 45 14 136 17 CD Kengai Co (12/11, amended) ate Limni Co (6/13) ria Mezza Co (6/11, amended) l.b Part A: Role and responsibility towards stakeholders Part B: Economic environment for multinationals 10 Global financial markets 11 Strom Co (12/12, amended) 12 Boxless (SFM, 12/04, amended) ym International trade as Part C: Advanced investment appraisal 45 15 140 25 45 16 143 19 Your business (6/09, amended) 25 45 17 146 20 Kodiak Company (12/09, amended) 25 45 17 149 21 Tisa Co (6/12, amended) 25 45 19 152 22 Arbore Co (12/12, amended) 25 45 19 154 23 Preparation question: Cathlynn 15 27 21 156 24 MMC (6/11, amended) 25 45 21 157 25 Marengo Co (12/10, amended) 25 45 22 159 26 Digunder (12/07, amended) 25 45 22 162 27 Alaska Salvage Co (12/09, amended) 25 45 23 164 28 Strayer (SFM, 6/02, amended) 25 45 23 167 29 Neptune (6/08, amended) 25 45 24 169 htt p:/ /fr e ea cc 25 18 Slow Fashions Co (6/09, amended) Finding questions http://freeaccastudymaterial.blogspot.com/ v http://freeaccastudymaterial.blogspot.com/ Time Page number co m/ Part A: Role and responsibility towards stakeholders Marks allocation Mins Question Answer 30 Airline Business (12/07, amended) 25 45 25 173 31 Fubuki (12/10) 25 45 25 32 Coeden Co (12/12, amended) 25 45 26 33 Levante Co (12/11, amended) 25 45 27 34 GNT Co (Pilot paper) 25 45 28 184 35 Do-it-Yourself 25 45 29 187 36 AWP Co 25 45 30 191 37 Preparation question: Somax (FS, 6/96, amended) 12 22 30 193 38 Pondhills (FS, 6/01, amended) 25 45 31 194 39 Ennea (6/12) 25 45 32 196 45 34 199 45 35 202 45 35 204 45 37 208 25 45 38 211 25 45 39 213 25 45 41 216 25 45 42 219 25 45 43 221 25 45 44 224 25 45 47 228 25 45 48 230 25 42 Fly 4000 25 43 Burcolene (12/07, amended) 25 44 Sigra Co (12/12, amended) 45 Hav Co (6/13) ate Part E: Corporate reconstruction and reorganisation 46 AIR 47 Doric Co (Pilot paper) ym 48 Proteus Co (12/11, amended) 49 BBS Stores (6/09, amended) 179 181 log sp o t 41 Saturn Systems (6/08, amended) ria 25 l.b Part D: Acquisitions and mergers 40 Mercury Training (6/08, amended) 176 50 Kenduri Co (6/13) 51 Troder (SFM, 6/03, amended) 25 45 48 232 53 KYT (FS, 6/99, amended) 25 45 49 234 54 Asteroid Systems (6/08, amended) 25 45 50 236 55 Multidrop (6/10, amended) 25 45 50 239 56 NTC (SFM, 6/02, amended) 25 45 51 242 57 Casasophia Co (6/11, amended) 25 45 52 245 58 Alecto Co (Pilot paper) 25 45 53 248 59 HYK (FS, 12/99, amended) 25 45 54 251 60 Phobos Co (12/08, amended) 25 45 55 254 61 Katmai Co (12/09, amended) 25 45 56 256 62 Sembilan Co (6/12, amended) 25 45 56 259 63 Lamri Co (12/10, amended) 25 45 57 261 htt p:/ /fr e ea cc as 52 MJY (SFM, 12/05, amended) tud Part F: Treasury and advanced risk management techniques vi Finding questions http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ Time Page number co m/ Part A: Role and responsibility towards stakeholders Marks allocation Mins 64 Moose Co (12/09, amended) 25 45 59 65 GoSlo Motor Corp (6/10, amended) 25 45 59 66 Kilenc Co (6/12, amended) 25 45 60 268 67 NRD Co 25 45 61 271 Question Part G: Emerging issues 61 273 50 90 64 278 70 Tramont Co (Pilot paper) 50 71 International Enterprises (12/07, amended) 50 90 65 282 90 67 287 72 McTee (SFM, 6/05, amended) 50 90 69 290 73 Wurrall (SFM, 6/04, amended) 50 90 70 296 74 Blipton International (12/08, amended) 50 75 Jupiter Co (12/08, amended) 50 90 72 301 90 73 306 50 90 74 310 50 90 76 314 50 90 78 318 50 90 79 324 50 90 81 329 50 90 83 335 50 90 84 340 50 90 86 345 50 90 88 349 50 90 89 353 50 90 90 359 50 90 91 363 50 90 93 367 89 Sleepon (SFM, 12/05, amended) 50 90 95 372 90 Fuelit (FS, 12/00, amended) 50 90 96 376 76 Trosoft (SFM, 12/04, amended) 77 Your company (FS, 6/99, amended) ate 78 Omnikit (FS, 6/97, amended) 79 Intergrand (SFM, 12/02, amended) 80 Pursuit Co (6/11, amended) 83 Romage (FS, 6/00, amended) 85 Polytot (SFM, 6/04, amended) 86 FNDC (SFM, 12/06, amended) 87 Nente Co (6/12, amended) ea Mock exam cc Mock exam as 88 Seal Island (6/10, amended) tud 84 Galeplus (SFM, 12/04, amended) ym 81 Laceto (FS, 6/01, amended) 82 Anchorage Retail Co (12/09, amended) l.b 69 Lignum Co (12/12, amended) 266 90 ria 50 264 log sp o t Part H: 50 mark questions 68 Mlima Co (6/13) Answer htt p:/ /fr e Mock exam (December 2013) Finding questions http://freeaccastudymaterial.blogspot.com/ vii Topic index co m/ http://freeaccastudymaterial.blogspot.com/ Listed below are the key Paper P4 syllabus topics and the numbers of the questions in this Kit covering those topics If you need to concentrate your practice and revision on certain topics or if you want to attempt all available questions that refer to a particular subject, you will find this index useful Question numbers Acquisitions - regulatory framework and processes 8, 41, 81, 87, Mock Q3 Acquisitions and mergers versus other growth strategies 41, 43, 44, 45, 68, 71, 74, 76, 78, 79, 82, 89, Mock Q3 Application of option pricing theory in investment decisions 18, 23, 24, 25, 26, 27, 69, 90, Mock Q1 Business re-organisation 40, 46, 47, 48, 49, 70, 83, Mock Q4, Mock Q4 Conflicting stakeholder interests 1, 4, 5, 7, 12, Mock Q1 Dividend policy in multinationals and transfer pricing 8, 12, 13, 15, 63, 71, 78, 85, Mock Q4 Environmental issues 3, 6, 7, 70, 80, 90 Ethical issues 2, 3, 4, 6, 14, 68, 83 Financial planning for multinational organisations 10, 12, 15, 72, 74, 79, Mock Q1 Financial reconstruction 46, 83 Financial strategy formulation 1, 2, 3, 4, 6, 39, 71, 73, 75, 82, 87, Mock Q4 l.b ria ate Financing acquisitions and mergers log sp o t Syllabus topic 79, 81, 82, Mock Q3 38, 50, 52, 53, 54, 55, 56, 57, 69, 72, 75, 84, 85, Mock Q2, Mock Q2 Foreign exchange risk hedging 10, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 39, 40, 62, 70, 72, 73, 75, 76, 77, 88 ym Impact of financing on investment decisions and adjusted present values 27, 51, 53, 58, 59, 60, 61, 62, 82, 84, 86, Mock Q2, Mock Q2 tud Interest rate risk hedging International investment and financing decisions 18, 37, 85, 86, Mock Q1 International trade and finance 72, 73, 84 as Investment appraisal - discounted cash flow techniques Islamic financing cc Management of international trade and finance 16, 17, 18, 19, 21, 22, 29, 74, 75, 76, 88, 89, 90, Mock Q1, Mock Q3, Mock Q1, Mock Q3, Mock Q1 64, 67, 77, Mock Q4 9, 11, 12, 13, 14, 39, 85, Mock Q1 2, 10, 14, 71, 73, Mock Q1 Treasury function 50, 52, 54, 84, 86 ea The role and responsibility of senior financial executive/advisor 20, 42, 43, 68, 73, 79, 80, 87, Mock Q3 Valuation for acquisitions and mergers 42, 43, 68, 78, 79, 80, 81, 87, Mock Q3 /fr e Valuation and the use of free cash flows 64, 65, 66, 80, 85 htt p:/ World financial markets viii Finding questions http://freeaccastudymaterial.blogspot.com/ co m/ http://freeaccastudymaterial.blogspot.com/ Helping you with your revision BPP Learning Media – Approved Learning Partner - content Tackling revision and the exam Using feedback obtained from the ACCA exam team review: log sp o t As ACCA’s Approved Learning Partner – content, BPP Learning Media gives you the opportunity to use exam team reviewed revision materials By incorporating the examiner’s comments and suggestions regarding syllabus coverage, the BPP Learning Media Practice and Revision Kit provides excellent, ACCA-approved support for your revision We look at the dos and don’ts of revising for, and taking, ACCA exams  We focus on Paper P4; we discuss revising the syllabus, what to (and what not to do) in the exam, how to approach different types of question and ways of obtaining easy marks l.b  Selecting questions ria We provide signposts to help you plan your revision A full question index  A topic index listing all the questions that cover key topics, so that you can locate the questions that provide practice on these topics, and see the different ways in which they might be examined Making the most of question practice ate  ym At BPP Learning Media we realise that you need more than just questions and model answers to get the most from your question practice Our Top tips included for certain questions provide essential advice on tackling questions, presenting answers and the key points that answers need to include  We show you how you can pick up Easy marks on some questions, as we know that picking up all readily available marks often can make the difference between passing and failing  We include marking guides to show you what the examiner rewards  We include examiners’ comments to show you where students struggled or performed well in the actual exam  We refer to the 2014 BPP Study Text (for exams up to June 2015) for detailed coverage of the topics covered in questions  In a bank at the end of this Kit we include the official ACCA answers to the June and December 2013 papers Used in conjunction with our answers they provide an indication of all possible points that could be made, issues that could be covered and approaches to adopt ea cc as tud  /fr e Attempting mock exams htt p:/ There are three mock exams that provide practice at coping with the pressures of the exam day We strongly recommend that you attempt them under exam conditions Mock exams and reflect the question styles and syllabus coverage of the exam; Mock exam is the December 2013 paper Helping you with your revision http://freeaccastudymaterial.blogspot.com/ ix htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ 494 Mathematical tables and formulae http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Mathematical tables and formulae http://freeaccastudymaterial.blogspot.com/ 495 htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ 496 Mathematical tables and formulae http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t co m/ http://freeaccastudymaterial.blogspot.com/ Notes http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ Name: co m/ Review Form – Paper P4 Advanced Financial Management (06/14) Address: During the past six months you recall seeing/receiving any of the following? (Tick as many boxes as are relevant) log sp o t How have you used this Kit? (Tick one box only) Home study (book only) On a course: college Our advertisement in Student Accountant With 'correspondence' package Our advertisement in Pass Other Our advertisement in PQ Our brochure with a letter through the post Why did you decide to purchase this Kit? (Tick one box only) Our website www.bpp.com Which (if any) aspects of our advertising you find useful? (Tick as many boxes as are relevant) Have used the complementary Study text Have used other BPP products in the past l.b Recommendation by friend/colleague Prices and publication dates of new editions Information on product content Saw advertising Facility to order books off-the-page Other None of the above ate ria Recommendation by a lecturer at college Home Study Package Kit i-Pass ym Which BPP products have you used? Text Passcards Your ratings, comments and suggestions would be appreciated on the following areas Questions Top Tips etc in answers Mock exam answers cc Overall opinion of this Kit as Content and structure of answers Very useful Useful Not useful Good Adequate Poor Yes No tud Passing P4 Excellent Do you intend to continue using BPP products? ea The BPP Learning Media ACCA Range Manager of this edition can be e-mailed at: pippariley@bpp.com htt p:/ /fr e Please return this form to: Pippa Riley, ACCA Range Manager, BPP Learning Media Ltd, FREEPOST, London, W12 8AA http://freeaccastudymaterial.blogspot.com/ http://freeaccastudymaterial.blogspot.com/ co m/ Review Form (continued) TELL US WHAT YOU THINK htt p:/ /fr e ea cc as tud ym ate ria l.b log sp o t Please note any further comments and suggestions/errors below http://freeaccastudymaterial.blogspot.com/ ... tud ym ate http://www.accaglobal.com/en/student/qualification-resources /acca- qualification /acca- exams /p4- exams/studentsacca-exams -p4- past_papers.html Revising P4 http://freeaccastudymaterial.blogspot.com/... coverage, the BPP Learning Media Practice and Revision Kit provides excellent, ACCA- approved support for your revision We look at the dos and don’ts of revising for, and taking, ACCA exams  We... the ACCA qualification This means we work closely with ACCA to ensure our products fully prepare you for your ACCA exams as In this Practice and Revision Kit which has been reviewed by the ACCA