Author: Sai Manikanta Pedamallu

The Financial Management syllabus contains a section on Islamic finance (Section E3). All components of this section will be examined at intellectual level 1, knowledge and comprehension Although the concept of Islamic finance can be traced back about 1,400 years, its recent history can be dated to the 1970s when Islamic banks in Saudi Arabia…

This article suggests an approach for students to apply to a key area of the Financial Management syllabus before finishing with a worked example to demonstrate the technique discussed. The requirement to analyse suitable financing alternatives for a company has been common in Financial Management over the years. I am sure it will be examined again…

The calculation of equivalent annual costs is a tool that can be used by companies to assist in asset replacement decisions. Equivalent annual costs At some stage you have probably bought an asset such as a car, a washing machine or a computer and you may have considered how long you should keep that asset…

In this article, we consider potential finance sources that an SME could use, with a particular focus on the more modern sources of crowdfunding and supply chain financing. Prior to considering some of the finance sources available to small and medium-sized enterprises (SMEs) we should first consider what we mean by SMEs, why they are…

This article focuses on foreign accounts receivable, which present some additional challenges to a business that are not present with domestic-based customers. Foreign accounts receivable present some additional challenges to a business that are not present with domestic-based customers. It is harder for a business to pursue any overdue amounts from a business in another…

In the final article in his three-part series, we look at the theory, advantages and disadvantages of CAPM. Section E of the Financial Management study guide contains several references to the Capital Asset Pricing Model (CAPM). This article is the final one in a series of three, and looks at the theory, advantages, and disadvantages of the…

This article describes how to apply the CAPM when calculating a project-specific discount rate to use in investment appraisal. Project-specific discount rates Section E of the Study Guide for Financial Management contains several references to the Capital Asset Pricing Model (CAPM). This article, is the second in a series of three, and looks at applying the CAPM…

In the first of a three-part series of articles, we consider the CAPM and its components, shows how it can be used to estimate the cost of equity, and introduces the asset beta formula. The cost of equity Section E of the Study Guide for Financial Management contains several references to the Capital Asset Pricing…

This article looks at Section G of the Financial Management Study Guide relating to the management of interest rate risk. Section G of the Financial Management Study Guide specifies the following relating to the management of interest rate risk: (a) Discuss and apply traditional and basic methods of interest rate risk management, including: (i) matching and smoothing (ii)…

Section C2d) of the Financial Management Study Guide states that candidates should be able to ‘discuss, apply and evaluate the use of relevant techniques in managing accounts receivable’. Section C2d) of the Financial Management study guide states that students should be able to ‘discuss, apply and evaluate the use of relevant techniques in managing accounts receivable’. Further…

This article covers the foundations of working capital management, a core area of the Financial Management syllabus, and focuses on the analysis of current assets and current liabilities. The topic can form part, or the whole of, a 20-mark question in the exam, as well as being examined by objective test questions. This article covers…

This article briefly looks at what behavioural finance is and some important terms related to behavioural finance which students should know. Learning outcome F4c of the Financial Management (FM) syllabus is as follows: Describe the significance of investor speculation and the explanations of investor decisions offered by behavioural finance. The learning outcome is at intellectual…

Dividends and share price growth are the two ways in which wealth can be provided to shareholders. This article looks at some theories on dividend payments, as well as the practical matters that have to be taken into account and a discussion on dividend policies. Dividends and share price growth are the two ways in…

This article discusses the nominal terms and real terms approaches to investment appraisal using the net present value method, and also considers the impact of taxation in the context of these approaches. This is an area of the syllabus where mistakes are often made by unprepared candidates. The effect of inflation on cash flows In…