ACCA F9(FM) and P5 (APM) Study Notes 2018

1. ACCA Advanced Performance Management (APM) APM P5 Study Notes by Sir Rizwan Maniya



ACCA P5 Study Notes by Sir Rizwan Maniya are available for download in the pdf format. You can download the ACCA P5 Study Notes 2018-2019 by just clicking on the download link given at the above / end of this post. ACCA P5 Study Notes by Sir Rizwan Maniya will help you to assist in your upcoming exams in September – 2018 to June – 2019 in a very short time. ACCA P5 Study Notes are in the summarized form and helping many students to get pass their exams in the first attempt.

2. ACCA FM F9 Short Notes 2018 – 2019 by Tommy Leung

Download ACCA FM F9 Short Notes 2018 – 2019

Dear students, you can download the Download ACCA F9 Short Notes 2018 – 2019 by clicking the download link given below. These notes are created by Mr. Tommy Leung. He also gave online tuition for F9 (Financial Management) to the students, you can contact him via contact details given in the notes. He has well explained all the topics in the short notes and provided the important points to remember. 
I have posted some part of his notes in this article. 

CAPITAL INVESTMENT APPRAISAL

Introduction

Capital investment is a key element in financial management and a thorough understanding of the
techniques of investment appraisal is very important. Textbooks compare Non discounted cash flow
methods (namely payback and ARR) with the discounted cash flow methods (namely NPV and IRR),
concluding that NPV is the best!

Non-Discounted Cash Flows (DCF) methods

(a) Accounting Rate of Return (ARR)
Accounting rate of return (also called the return on investment -ROI) is calculated as:
  • Profit / Capital
but whether profit is before or after interest charges and whether the investment is the initial outlay or averaged over the life of the project is unclear, a weakness of definition of profit and capital! 
However, this ratio is normally calculated using the company’s published accounts, so one would expect ARR be calculated base on the accounting standards definition of profit and capital, and is normally:
  • Profit / Average (written down) Investment
OR, if we were to measure management’s performance, the ratio would be:
  • Profit before interest and tax / average (total) capital employed
OR, measuring the return to shareholders the ratio would be:
  • Profit after interest and tax / shareholders funds (equity)
In the exam, pay attention to the definition of the ratio given in the question!!

Weaknesses of ARR

  • It ignores the cost of capital tied up in the project by not discounting the cash flows.
  • The use of profit in decision making may include a lot of irrelevant costs such as depreciation and generally fixed cost but ignore opportunity cost
  • Profit is always subject to accounting manipulation
Though there may be many weaknesses associated with this method, it is still one of the most the commonly used method due to its utilization of the balance sheet and P/L account magnitudes familiar to managers, namely profit and capital employed. It is not surprising that some managers may be happiest in expressing project attractiveness in the same terms in which their performance will be reported to shareholders, and according to which they will be evaluated and rewarded. Afterall, most companies bonus payment is based on ROCE achieved.




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