Examiner reports are a goldmine of tips into what the markers want. Andrew Mower picks out the key messages from the September/December 2024 examiner’s report.
Question 1 (Northney Co)
This was the big 50-mark question, covering risk management and treasury methods, with 10 professional skills marks.
Here are the three key messages from the examiner for hedging questions:
- Be specific and apply knowledge: don’t just discuss general concepts. Relate your answers directly to the scenario’s details (for example, Northney’s relocation, the specific country, etc.).
- Structure and clarity are crucial: use clear tables (especially for netting calculations) and a step-by-step approach for complex calculations like interest rate collars. Clearly state buy/sell decisions and contract numbers. Sub-headings are highly recommended for longer answers (like risk assessment).
- Focus on rationale: for hedging decisions, explain why a specific method (like futures or collars) was chosen.
Don’t just list pros and cons – connect them to the specific needs and circumstances of the company in the scenario
Question 2 (Mortexa Co)
This was a 25-mark question, covering equity valuations, impact on wealth and competition regulation, with five professional skills marks.
Here are the three key messages from the examiner for a valuation question like this:
- Interpret your calculations: don’t just calculate numbers; explain what they mean. For example, in acquisitions, calculate the synergy gains and explain how they contribute to the combined value. Even if your calculations are wrong, demonstrating your method and interpreting the (incorrect) results can earn partial credit.
- Consider all stakeholders: in shareholder approval questions, analyse the perspectives of both companies’ shareholders. Don’t just focus on one side. Base your analysis on the financial impact you’ve calculated.
- Apply concepts to the specific scenario: when discussing topics like Competition Authority concerns, don’t just list general principles.
Explain how those principles apply to the specific companies and market described in the scenario. Focus on relevant issues like market share and competition effects.
Question 3 (Zulla Co)
This was a 25-mark question, covering dividend and FCF valuations, discussion of methods and reverse takeovers.
Here are the three key messages from the examiner for a valuation question like this:
- Revise valuation calculations: practice calculating valuations using both dividend discount models and free cash flow methods. Specifically, revise which discount rate to use, how to calculate free cash flows from profit figures, and how to deal with perpetuities.
- Analyse and interpret your results: don’t just present numbers. Explain what they mean and why different valuation methods might produce different results. Demonstrate critical thinking by discussing potential limitations and uncertainties in your estimates.
- Understand IPOs and reverse takeovers: while basic knowledge of IPOs and reverse takeovers is important, go beyond simple definitions.
Be prepared to discuss the advantages and disadvantages of each approach in more detail, and consider the specific circumstances of the company seeking to list.
Five top tips from the examiner
1 Practice and understand your calculations AFM heavily relies on good calculations. Focus on key areas like valuation (FCF), hedging (forex, interest rates) and investment appraisal. And don’t just memorise formulas; understand why they’re used.
2 Clearly show your workings Yes, the markers can see the formula within each cell – but that doesn’t mean your numbers are easy to follow!
Clearly lay out calculations, explain your logic, and justify your decisions. Even if your final answer is incorrect, you can earn credit for your method and reasoning.
3 Apply knowledge to the scenario AFM questions are context-driven, so don’t give generic answers.
Relate your knowledge directly to the specific company, industry, and circumstances described in the scenario. For example, when discussing risk provide specific examples relevant to the country or industry mentioned.
4 Develop professional skills Demonstrate scepticism by questioning assumptions and considering alternative scenarios.
Show commercial acumen by connecting your analysis to real-world business practices and using the information in the scenario. Clearly evaluate different options and provide well- reasoned recommendations.
5 Practice and learn from feedback Past papers are your best resource. Practice regularly under exam conditions to improve your time management and identify your weak areas.
Carefully review examiner reports and model answers to understand common mistakes and improve your approach. Pay close attention to the wording of questions to ensure you’re answering what’s actually being asked.
Note: you can find the full exam on ACCA’s practice platform.
- Andrew Mower is an AFM expert tutor – see AMALearnOnline. He also helps ACCA students with his free YouTube videos (@andrewmowerAFM)
