Cima F3 Notes Financial Strategy Chapters 1 — And 2

| Concept | Key Points | Exam Tip | |---------|------------|-----------| | | Financial strategy supports business strategy (growth, risk, return). | Always link a financial decision back to a strategic goal. | | Stakeholder objectives | Shareholders (wealth maximisation), lenders (security), managers (incentives). | Agency conflicts → propose aligned incentives (e.g., share options). | | Financial objectives | ROCE > WACC, EPS growth, gearing range, liquidity ratio targets. | Be specific: “Maintain gearing <50% to protect debt capacity.” | | Risk & return trade-off | Higher return requires higher risk tolerance (e.g., new market entry). | Use CAPM or risk-adjusted discount rates in calculations. | | Sustainable growth rate (SGR) | g = retention ratio × ROCE. | If actual growth > SGR → need external finance. |

Master the calculations of interest rate futures and money market hedges, but never forget the "Strategic" in Financial Strategy. The examiner wants to see a management accountant who can protect the balance sheet (Chapter 2) while driving the business forward (Chapter 1). Cima F3 Notes Financial Strategy Chapters 1 And 2

A company has a floating rate loan (SONIA/SOFR). If rates rise, interest costs rise. How do we fix this? | Concept | Key Points | Exam Tip

Good luck with your F3 studies. Remember: Strategy without risk management is gambling. | Agency conflicts → propose aligned incentives (e

The APV calculation involves two steps: