In three sittings of the CIPFA Professional Qualification Financial Management (FM) module a relatively clear pattern has emerged. Around one third of candidates demonstrate the right knowledge, technique and understanding. Another third show that they have the knowledge and technique but although they do not always demonstrate sufficient understanding they often do just enough to pass. Around a third appear to lack both technique and understanding which makes it impossible to award enough marks to allow them to pass.
First of all, let’s look at knowledge. This is what you have in the learning materials. You need to absorb as much of it as possible. Remember, you don’t need to know absolutely everything, but a good grounding in all syllabus areas is a must. Check you cover the syllabus areas in accordance with the study weightings in the CIPFA FM syllabus. These weightings are used when writing the paper, so you need to pay them heed when you are studying.
Secondly, the FM paper tests several techniques. Numerical technique is important as something of the order of 50% of the marks available will be for calculations or numerical analysis of some kind. From the last two sittings it was quite clear that almost all candidates are entirely uncomfortable with the calculations involved in accepting or offering early payment discounts. Something similar could be said for the cost of debt calculations. These calculations need to be practised. Taking data from an exam scenario and processing that data quickly is not something that comes naturally to many people so to get to grips with the steps involved candidates must practise, practise and then practise some more.
Presentation of number-work is also often problematic. The examining team tries to award as many marks as possible but students do sometimes make it difficult to do that. Proper layout is often missing so the number-work is not presented logically. Candidates often present numbers without any words or explanation. Most numerical marks are available for process and logic (rather than getting the correct answer spot on), but students often deny themselves many of these marks by making their workings impenetrable. Imagine how difficult it would be to follow the suggested solutions to any of the last three exams if the numerical answers did not contain words.
Narrative answers can usually be improved by making them more succinct. Good scripts make a point and add some kind of explanation using an illustration or an example. The answers that score best in the FM exam are usually the ones which are written in short paragraphs. Three concise sentences per paragraph is a good benchmark. That will keep you succinct, if you go over that then your answer tends to waffle.
Students should, though, try to avoid bullet points. They lead to overly brief comments which are often unconvincing, insufficiently explained or simply incomprehensible.
Practising getting the narrative right is also important, not just practise of the number-work.
And finally, even though knowledge is a powerful thing, even more powerful is knowing how to use it. You must know what you know, but also what it means.
Make sure you can explain things like why we use certain discount rates in certain circumstances and why we do what we do when inflation impacts an investment appraisal. Ensure you can explain how your answers would change if one of the variables given to you would change. Ask yourself whether you could explain why each step in your calculations is necessary. In June 2013 we asked how certain variables may impact on the decision to acquire some fire engines. This kind of question is very likely to feature in future sittings because it is a very handy way of seeing whether candidates understand the principles at play.
And finally, apply your answer to the scenario in the question. If the requirement refers to a specific organisation or person in the scenario then you must make sure you remain relevant to that organisation. The examining team is not interested in anything that does not relate specifically to the characters mentioned in the requirement. In June 2013, we asked a question on treasury risk as it applied specifically to a particular local authority. Because the scenario related to investments (rather than borrowing), then any reference to refinancing risk was wrong. Nonetheless many candidates were in regurgitation mode and merely wasted time in mentioning it.
Finally, if you are preparing for a forthcoming FM exam, look at any of the last three sittings. Practice the questions and see what is said about them in the examiner’s commentary. Remember, the examining team is on your side and want you to do well. It is up to you to make it possible to give you the marks.
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