The ACA Financial Management exam is another tough exam within the professional level of the ACA qualification and will test candidates on relatively new topics such as options and full net present value calculations. The pass rate for this exam was 85.1% in the most recent exam season which demonstrates that this exam is passable provided students put in the necessary hard work.
To pass the ICAEW ACA Financial Management exam, candidates must become confident with the three commonly asked question types: NPV calculations, hedging and company valuations through repetitive question practice. Sticking to pre-determined exam timings will also be essential.
The Financial Management exam has a lot of interesting content, much of which is easily transferable to real-life work scenarios. Whilst the content can be tough with a lot of calculations involved, it is easy to predict what will come up in the exam which makes it much easier to plan a smart revision strategy than for other exams within the syllabus.
With that in mind, I have created the below guide which should help anyone studying for the Financial Management exam to organise a revision and exam strategy and ultimately pass this exam.
How to pass the ACA Financial Management exam
Passing the ACA Financial Management exam will come down to doing a few key things well. Firstly – how well the candidate prepares via question bank practice and getting to grips with the content and secondly how well the candidate is able to perform on exam day.
Whilst both are as important as each other, performing well on exam day is the easier part. This will be a case of managing exam nerves, managing the fatigue of taking a long exam (often on the same day as another professional level exam) and finally getting enough sleep on the lead up to exam day.
The difficult part is mastering the content but candidates should take confidence in the fact that the three questions will be easy to predict; net present value calculations, hedging/options and some form of company valuation question.
For most students, this will involve actively engaging with the tuition and practising these question types repetitively. There is no silver bullet here – it’s simply a case of putting the work in and sticking to a smart plan.
Success in the preparation phase will come down to the below points:
- Listening intently to the tutor and actively engaging with exercises and questions. Don’t be afraid to speak up if you don’t understand a concept or method, it’s better to fix these problems as early as possible.
- Creating a realistic but thorough revision timetable that you can stick to and that will provide enough study hours to master the content whilst also leaving some time to relax.
- Pummeling the question bank and mock exams repeatedly and learning from mistakes when you make them.
- Devise a smart strategy for exam day.
You only need 55% to pass this exam and if you manage to practice questions repetitively and calculate and stick to preset timings and write as much as you can for each question, you’ll be in a great position to pass this exam.
ACA Financial Management exam – key information
All of the key information regarding the ACA Financial Management exam is summarised below:
|Exam length||2.5 hours|
|Pass-rate||85.1%||At the most recent sitting, 85.1% of candidates passed the exam.|
|Level||Professional||The exams are in 3 levels; Certificate, Professional or Advanced. See the image below.|
|Structure||3 long questions (100%)|
|Location||Any ICAEW-approved test centre|
|CPL||Yes||It is possible to get a ‘Credit for Prior Learning’ (exemption) for this exam.|
|Open book?||No||This is not an open book or permitted text exam.|
How the exam is structured
The ACA Financial Management exam is within the professional level as shown below.
The exam is made up of 3 long-form, written questions covering the three core syllabus areas outlined above. The marks per question can vary from exam to exam.
The single most important thing you can do on this exam is to get your timings right and spend the correct amount of time on each question. To do this effectively, you’ll need to calculate the correct amount of time to spend on each question (process shown below) and be highly disciplined in sticking to these timings. Even if you’re halfway through a sentence when your time for the question is up, move on!
So what’s the most efficient way of working out the time you should spend per question?
Step 1 – write down how long the exam is in minutes. We know the exam is two and a half hours long. This converts to 150 minutes in total.
Step 2 – Take off 10 minutes from the total which is the time set aside to work out and write down your timings per question. This leaves 140 minutes of actual question-answering time.
Step 3 – We now know we have 140 minutes to answer questions worth 100 marks. This is 1.4 minutes (1 minute 24 seconds) per mark.
Step 4 – Go through the exam script and for each question or sub-question, calculate the time per question. For example, if a question is worth 35 marks, you would give yourself 35 * 1.4 minutes = 49 minutes.
Step 5 – Once you have done this for each question, confirm the timings for each question sums up to 140 minutes in total so you know you haven’t gone wrong anywhere.
This may sound like a hassle but with practice, you can do all of this for an exam script in under five minutes.
Taking the time to do this and then being strict with yourself to stick to the timings is the single most effective thing you can do within this exam. This technique will make sure you apply a good amount of time to each question and don’t fall victim to running out of time which is the reason many candidates fail this exam (and all ACA exams).
This is an important point – if any single question is taking you longer than the calculated time, move on! The single biggest reason people will fail this exam (other than not understanding the content) – is time management.
If you believe you have completed your answer to a particular question within the predetermined time, feel free to move onto the next one. You have just saved yourself a few minutes which can be put towards any question you have more to write for at the end.
The syllabus will cover:
- Financing options (35%).
- Managing financial risk (30%).
- Investing decisions and valuation (35%).
ACA Financial Management exam – revision strategy
With the exception of self-taught students, most of your revision time will be determined by your tuition provider.
For the Financial Management exam, revision or practice outside of the classroom should focus on the following items: question bank questions, mock exams, reviewing particular topics within the course notes and updating/reviewing your mistake notepad as outlined below.
In terms of how revision should be structured, my advice would be to complete a full long question and once complete, take a short break and then mark your answer with reference to both the marking scheme and the model answer. As you do this repetitively, you will become more conscious of areas you need to work on and the best ways of answering the questions.
The mark scheme and model answers are particularly helpful when studying for this exam as they show candidates the most simple ways to pick up marks within computation-style answers.
When studying, implement the Pomodoro technique (which is explained briefly in this Youtube video). This will maximise your productivity and help to avoid burnout and concentration lapses.
If it suits your studying style, consider joining a study group with one or two other students. I found this immensely helpful, not only does it help keep you accountable to study in line with your revision timetable, you and your study group can help cover each other’s weaknesses.
Beyond the above points, the most important thing is to listen and implement the advice of your tutors. They have likely taught this exam module several times and are well placed to advise on the best ways to revise and practice.
How to learn from your mistakes effectively
To make the most of your revision sessions, you need to be diligent in learning from your mistakes and making sure you don’t make the same errors over and over again.
I’ve found using the ‘notepad method‘ to be very helpful for this.
Here’s how it works – buy a nice new notepad and write ‘ACA Financial Management exam – mistakes’ on the front cover. Any time you make an error in mock exams, the question bank or the end of chapter questions within the course notes, write a note in your notepad explaining what the error was, why you made it, what the correct answer should be and a reminder to yourself about how this error can be avoided in the future.
At the start of each revision session, read through this notepad of mistakes and you’ll gradually stop making the same errors as you become more conscious of them.
ACA Financial Management exam – timings and strategy
As well as having a revision strategy, candidates should think about implementing a specific exam strategy to maximize their chances of success. This strategy should be based on three core factors: writing as much as possible for each question, being careful not to take too much time on any single question and ‘playing the game’ to get over 55%.
In this exam, the answers will be a mix of calculations and more discursive writing. Candidates can pretty much guarantee a net-present value question will appear in this exam and it therefore makes sense to practice a net present value proforma so that when it comes time to answer this question during the exam, the candidate can go through the motions, create the proforma and then begin answering the question.
The only caveat to this is that students should be careful to answer the question actually asked rather than the question they want to see that has come up in practice.
In fact, a careful reading of the question in this exam is particularly important throughout. Given a lot of the answers relate to making accurate calculations, misreading a question or misunderstanding a requirement can have severe consequences.
As discussed earlier, the key to success in this exam is being diligent with timings. For each question, multiply the number of marks by 1.4 minutes to calculate the total time to answer the question and then stick to this time.
By doing this, candidates will make sure they spend sufficient time answering each question. This is linked to the third factor which is that the pass-mark is only 55%. By leaving sufficient time for each question, candidates are able to have a good stab at every part of the exam which makes achieving the 55% pass mark much easier.
ACA Financial Management resources and past papers
Please use the links below for valuable resources (including past papers) to help pass the ACA Financial Management and Reporting exam (IFRS version):
- ACA Syllabus Handbook – refer to page 39 for Financial Management
- Details over the latest exam software in use
- Past paper – March 2021. Marking grid – March 2021.
- For other past papers and useful resources – click here.
How to tackle concepts you keep getting wrong
As with any exam, a certain proportion of the content will be challenging. It may even feel at times like you can’t understand a particular item no matter how much you read the course notes and practice questions.
If you find yourself in this situation and are beginning to get overwhelmed, here are my suggestions:
- Consider ignoring it. This will only work if it’s not a central concept. This may sound counter-intuitive but if for example, you are really struggling in one area and just can’t seem to get it, it may not be the worst idea to forget it. Remember, you only need 55% to pass the exam and this area is unlikely to make up more than a couple of the total points. Does it not, therefore, make sense to avoid spending hours trying to understand this concept when that time could be spent on more useful revision?
- If the topic can’t be ignored – ask either your tutor or a classmate who does understand it for help. In my experience, both tutors and classmates are more than willing to explain a concept and sometimes a new perspective can help you understand something that was previously incomprehensible.
- Consider google-ing the topic. A lot of very specific questions are explained online on blogs, forums or Youtube videos which may help unlock your understanding.
Common difficult concepts in the ACA Financial Management exam
As discussed above, the three questions within this exam are pretty easy to predict: net present value calculations, hedging and options and company valuations. This allows students to be more precise when it comes to practising questions.
Despite this, all three of these concepts contain a lot of information and tricky little nuances which means all three can be difficult.
Many students struggle to get their heads around hedging and the various types such as future and forward contracts to start with due to the novelty of the content. However, once this is understood, this tends to be a topic students can pick up lots of marks for in the exam as the questions are very repetitive with little variability over time.
Net present value calculations aren’t easy but do represent an opportunity for easy marks on the exam if the candidate can push themselves to practice 10-15+ NPV questions during the revision phase. There really is no substitute for this repetitive question practice.
Back when I did this exam, I found company valuations and concepts such as calculating the WACC to be the most difficult. My advice is to not get hung up on tricky minor points and to make sure you have a solid understanding of the fundamentals.
Tips for exam day
I often use the metaphor of a boxer preparing for a fight for how candidates should prepare for the ACA exams. Both the pre-fight preparation and the fight-day itself are equally important. If you don’t prepare properly, you won’t be successful. Similarly, if you prepare well, but perform poorly on the day, you won’t be successful.
With this in mind, I’ve laid out a few tips to help optimise your exam day performance that worked consistently for me during my exam days.
Needless to say, being well prepared is crucial. It doesn’t matter how well you sleep the night before the exam or how dialled in your pre-exam ritual is if you don’t know the content. There is nothing that will help calm exam nerves to the extent that being over-prepared will.
As well as being well prepared on the exam content, it also pays off to be well prepared practically speaking. Things go wrong in exams so have contingencies planned. If you’re doing your exam from home as many are at the moment, have a backup plan if your wifi cuts out e.g. a mobile phone hotspot connection. Take an earlier train into the exam centre in case there are signal failures (which there seem to be most days).
My next tip may sound a bit like something your Grandmother would say but regardless – get a good night’s sleep for the week leading up to the exam. One good sleep does not make up for poor sleep every other night. Get your 7-8 hours per night. Believe me, this will have a bigger impact than another hour of revision late at night. The research is very clear that good sleep is crucial for memory retention which is a big part of all of the ACA exams.
Finally, a quick point on when is the right time to stop revising. My advice is to stop revising a few hours before you sleep on the night before the exam and relax for a few hours. Trying to cram material late on the night before the exam will probably not help and almost certainly make it more difficult to sleep.
Should you take your ACA exam exemption?
Some students will be exempt from certain exams due to the credit for prior learning (CPL) system. For students who have studied Accounting at university or have done similar qualifications in the past, certain ICAEW ACA modules will be a duplication of content. Rather than repeating an exam already passed, students can apply for credit for prior learning and become exempt from the exam.
More information on ACA exam exemptions can be found here.
Whether students apply for and take exam exemptions is up to them but it’s worth noting the big advantage and disadvantage of doing so.
The big advantage is clear – students can save themselves significant study time and exam stress by taking an exemption and use that saved time for other exams they are not exempt from taking.
However, the disadvantage is that the ACA qualification is structured in tiers as discussed above. For example, students will take ‘Accounting’ at the certificate level, ‘Financial, Accounting and Reporting’ at the professional level and ‘Corporate Reporting’ at the advanced level with the knowledge and skills being built upon and compounded throughout.
This means if a student were to take an exemption from the Accounting exam for example – when it comes to taking the difficult Financial Accounting and Reporting exam, the underlying content will not be fresh in mind which may become a difficult obstacle to overcome.
As always, please remember I am an Accountant, but not your Accountant. In this post (and all of my others) I share information and oftentimes give anecdotes about what has worked well for me. However, I do not know your personal financial situation and so do not offer individual financial advice. If you are unsure of a particular financial subject, please hire a qualified financial advisor to guide you.
This article has been written by Luke Girling, ACA – a qualified Accountant and personal finance enthusiast in the UK. Please visit my ‘About‘ page for more information. To verify my ACA credentials – please search for my name at the ICAEW member finder. To get in touch with questions or ideas for future posts, please comment below or contact me here.