Paper 3.7 - Strategic Financial Management
 

Aim

To ensure that students can exercise judgement and technique to make commercial value added decisions in strategic financial management and are able to adapt to changes in factors affecting those decisions.

Objectives

On completion of this paper candidates should be able to:

  • prepare reports for management explaining and evaluating the financial consequences of strategic decisions
  • identify and evaluate appropriate sources of finance, their risks and costs and assess potential investment decisions and strategies
  • understand the impact of the global business environment on national and multi-national organisations
  • explain, demonstrate and recommend suitable risk management techniques for multinationals
  • understand the significance of cash management and the treasury function in the commercial environment and
  • demonstrate the skills expected in Part 3.

Content

Objectives and corporate governance aims and objectives of an organisation and their impact on business planning, key stakeholders, environmental issues, goal congruence, key aspects of governance, implications of corporate governance.

Strategy formulation strategic planning process and link with investment decisions, strategic planning for multinationals.

Risk analysis cost of capital, cost of equity (CAPM and DVM), cost of debt, WACC, impact of varying capital structures, interest rate and foreign exchange risk, hedging.

Investment decisions decision making techniques, in particular detailed knowledge of discounted cashflow (NPV), adjusted NPV, expansion strategies - acquisition, merger and takeover, valuations, defence strategies.

Treasury management and financial forecasting methods of financing short and long term investment, role of cashflow forecasting in business planning, role of the treasury function, dividend policy.

The global economic environment international factors affecting business developments, global competition, role of multi-national companies, free trade, protectionism, trade agreements, common markets, exchange rate determination, introduction of a single currency, role of World Bank and International Monetary Fund (IMF), economic relations between developed and developing countries.

Global financial management appraisal of overseas investment decisions including the impact of overseas taxation, overseas cost of capital, forecasting future exchange rates, political risk, raising capital overseas, managing financial resources within a multinational group.

Ethical considerations ethics and business conduct.

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