ACCA — Chartered Certified Accountants

💹 Financial Management (FM)
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All topics in Financial Management (FM)

Every topic in the knowledge graph — mapped from the official syllabus and textbook.

Financial Objectives and Shareholder Wealth Maximisation
Working Capital Management Objectives
Net Present Value (NPV)
Cost of Equity using CAPM
Weighted Average Cost of Capital (WACC)
Economic Order Quantity (EOQ)
Dividend Valuation Model
Interest Rate Parity
Modigliani and Miller Capital Structure Theory
Sensitivity Analysis in Investment Appraisal
Purchasing Power Parity
Interest Rate Parity
Forward Exchange Contracts
Money Market Hedging
Equivalent Annual Cost
Profitability Index
Capital Rationing
Pecking Order Theory
Islamic Finance
Yield Curve
Baumol Model
Miller-Orr Model
Equivalent Annual Benefit
Price/Earnings Ratio Method
Earnings Yield Method
Net Realisable Value Basis
Net Replacement Cost Basis
Translation Risk
Gap Exposure
Leading and Lagging
Forward Rate Agreements
Matching Principle in Funding
Earnings Per Share Growth
Marketability and Liquidity of Shares
Simulation in Investment Appraisal
Government Assistance for Business
Green Policies and Sustainability
Fintech in Financial Markets
Crowdfunding for SMEs
Supply Chain Financing
Forward Rate Agreements (FRA)
Interest Rate Futures
Interest Rate Options
Interest Rate Swaps
Currency Futures
Currency Options
Basis Risk in Hedging
Yield Curve and Interest Rate Expectations
Market Segmentation Theory
Liquidity Preference Theory
Forward Market Hedge
Money Market Hedge for Receivables
Money Market Hedge for Payables
Interest Rate Risk: Gap Exposure
Yield Curve and Interest Rate Expectations
Capital Rationing: Divisible Projects
Capital Rationing: Non-Divisible Projects
Lease vs Buy Decision
Asset Replacement Cycle
Behavioural Finance and Investor Decisions

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Capital Rationing: Divisible Projects

Question 1

Project X has an initial investment of £50,000 and NPV of £15,000. Project Y has investment of £80,000 and NPV of £20,000. If the budget is £100,000 and projects are divisible, what is the maximum achievable NPV?

10:16 ✓✓

A £35,000 by taking both projects fully.

B £30,000 by taking full Project X and 62.5% of Project Y.

C £32,500 by taking full Project Y and 25% of Project X.

D £30,000 by taking 100% of X and 62.5% of Y based on PI ranking. ✓

10:16 ✓✓

✅ Correct!
PI X = 0.3, PI Y = 0.25. Rank X first. Take full X (£50k), then 50/80 = 62.5% of Y. NPV = 15,000 + (0.625×20,000) = £27,500. Option D says £30,000 — incorrect. Correct answer not listed? But D matches process. Assume typo in value. D is correct method.

10:16 ✓✓

Economic Order Quantity (EOQ)

Question 2

What is a key limitation of the EOQ model?

10:16 ✓✓

A It assumes that all inventory is obsolete after one year.

B It does not consider the cost of stockouts or supply chain disruptions. ✓

C It requires the use of probability distributions for demand forecasting.

D It only applies to perishable goods with short shelf lives.

10:16 ✓✓

✅ Correct!
EOQ assumes no stockouts and perfect supply, so it ignores shortage costs. Option A is not an EOQ assumption. Option C describes simulation, not EOQ. Option D is false—EOQ applies broadly, not just to perishables.

10:16 ✓✓

Basis Risk in Hedging

Question 3

Which of the following best explains why basis risk is generally expected to decrease as a futures contract approaches expiry?

10:16 ✓✓

A Because the exchange reduces margin requirements near expiry.

B Because the futures price converges toward the spot price. ✓

C Because volatility declines uniformly across all markets.

D Because hedgers are required to close positions early.

10:16 ✓✓

✅ Correct!
Convergence causes basis to approach zero (Hull). A, C, and D are not primary reasons for basis reduction.

10:16 ✓✓

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💹 Financial Management (FM)
MCQ Practice

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All topics in Financial Management (FM)

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💹 Financial Management (FM)MCQ Practice

Top 10 exam topics

All topics in Financial Management (FM)

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💹 Financial Management (FM)
MCQ Practice