ACCA F9 Financial Management

Sample Study Note

For exams in June2014

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 Lesco Group Limited, April 2015 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Lesco Group Limited.

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Sample Note Content:

MAIN STUDY NOTE CONTENT [TOTAL PAGES: 151] ................................................ 4 PRODUCT SUMMARY ............................................................................................... 6 LIVE ONLINE NOTE SAMPLE PLAN .......................................................................... 7 LIVE ONLINE COURSE TIMETABLE:......................................................................... 8 ISLAMIC FINANCE ................................................................................................ 11 CHAPTER 5 DIVIDEND POLICY ............................................................................. 15

Please note:
This is just the sample study note extracted from the main study note in your tuition study [This tuition study note is consistent in basic/super/gold package]. There would be more chapters in the main study note covering the whole ACCA syllabus. You can also take a look at the content within the main study note below:

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Main study note content [Total Pages: 151]

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Product Summary

content

Basic package

Super package

Gold Package

Oxford Brookes BSc in Applied Accounting

ACCA HD quality super tuition videos

ACCA HD quality super revision videos

Last minute revision ACCA Live online tuition(4sessions) ACCA Live online revision(14hours) ACCA Mock exams(with tutor mark) ACCA Tutor support ACCA Electronic study note ACCA Student online forum Pass Guarantee ACCA Final revision mock exam paper ACCA Super Live online session (2030hours) ACCA Super Live online revision (Super 3 days) ACCA 1V1 Career Advice ACCA Extra exam techniques demonstration Live online mentoring

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Live online note sample plan

Live online tuition note plan for June2014 F9 Exam [Only for super / gold package (there would be a unique plan for gold package)]

Live sessions: [2 hours/session---live online + recorded after class]:

Live session1: Investment decision Live session2:financing decision + dividend policy Live session3: working capital management Live session4:business valuation + risk management

Live revision note for June2014 F9 exam: [will be available since mid April 2014]: Live revision1+2: [There would be a separate live revision note detailing all past exam questions with answers to go through]

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Live online course timetable:

Live session/revision for F4-P7

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*Please Note: This Timetable may be subjected to future changes. Kindly check regularly for any possible updates.

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Islamic Finance

RIBA (Interest) is not allowed.

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Islamic financial instrument:

Fixed income mode: 1. Murabaha(Loan) Instead of borrowing money from a conventional bank to buy something, people would sign a Murabaha contract with the Islamic bank that the bank would buy something from the seller and sells to that person with all profit, costs being disclosed.

2. Ijara (Lease) This is like a lease but: 1. the asset you lease must be tangible; 2. the lessor bears all risks and rewards of the asset.

3. Sukuk (Debt finance) Intead of just getting interest and principal from the loan issuer, with Sukuk that person would also have a right to share profit and cash flow from the asset and the underlying asset would belong to that person as well.

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Equity Mode: 1. Mudaraba (Equity): The investor and management set up a company and investor is responsible for money invested in the business whilst management is responsible for the running of the business. Any profit made would be distributed on a pre determined ratio according to Mudaraba contract and the investor would bear the losses only.

2. Musharaka (Joint venture): Two or more investors would set up a company and invest their money into the business. Any profit made from the business would be distributed on a pre determined ratio or capital contribution; Losses incurred would be distributed under capital contribution of each party.

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Advantages and disadvantages of using Islamic finance:

Advantages: Because uncertainty, risk or speculation is not allowed and hence this reduce the risk of losses Excessive profit is not allowed under Mudaraba contract and only reasonable mark up is allowed. And because interest is not allowed and hence reduces the risk that company collapses and hence bank would have a smaller risk to collapse. Disadvantages: There is no particular standard on those Islamic financial instrument product and hence the transaction cost dealing with each transaction would be high. Islamic banks cannot minimise their risks in the same way as conventional banks as hedging is prohibited.

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Chapter 5 Dividend policy

M&M said dividend policy is not important because: (Dividend irrelevance theory)

1. There is no tax: when receiving a dividend you dont need to pay income tax and when you sell a share you dont need to pay capital gains tax. 2. There is no transaction cost: this means shareholders can sell a share freely incurring no costs. 3. Perfect market: this means if company cuts dividend for the year then shareholders know exactly why they are doing this, ie, retain profit and invest in profitable projects to generate a higher return.

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But the actual world suggests this matters because: (Traditional theory) 1. There is tax: when receiving a dividend you need to pay income tax and when you sell a share you need to pay capital gains tax.

2. There is transaction cost: this means when shareholders sell a share then it incurring costs.

3. Imperfect market: this means if company cuts dividend for the year then shareholders dont know exactly why they are doing this and this would make shareholders not happy.

Signaling effect: if company cuts dividend and it suggests company is having cash flow problems.

Clientele effect: some shareholders would prefer dividend and hence they buy the shares.

There would be other ways besides giving shareholder dividend:

Give them something: for Free, like free flights/free shares. Given them cash: by repurchasing shares from the market.

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