PassSpark

ACCA Financial Management (FM) 2022 past questions and answers

This 2022 ACCA Financial Management (FM) set has 20 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2022 set with instant marking.

Practise the full 2022 setTimed exam mode

Sample ACCA Financial Management (FM) 2022 questions

1. The board of Lumen Ltd is assessing a proposal that is expected to increase the company's long-term market value, although it will reduce this year's reported profit. Which financial objective should normally guide the board's decision?
  1. Maximise this year's accounting profit regardless of future effects
  2. Maximise shareholder wealth over the long term
  3. Minimise all financial risk, even if profitable investments are rejected
  4. Maximise revenue without considering the cost of finance

Answer: B. Maximise shareholder wealth over the long term

The primary financial management objective is normally to maximise shareholder wealth, reflected in the long-term value of the company. A single year's accounting profit can conflict with value creation and does not capture the timing or risk of cash flows.

2. A lender estimates that the real annual interest rate required by its investors is 4% and expected annual inflation is 5%. Using the exact Fisher relationship, what nominal annual interest rate should it quote?
  1. 9.0%
  2. 8.8%
  3. 9.2%
  4. 10.0%

Answer: C. 9.2%

The exact Fisher relationship is (1 + nominal rate) = (1 + real rate)(1 + inflation). Thus the nominal rate is (1.04 × 1.05) − 1 = 9.2%; simply adding the rates gives only the approximate 9.0%.

3. A distributor holds inventory for an average of 48 days, collects receivables after 32 days and pays suppliers after 25 days. What is its cash operating cycle?
  1. 55 days
  2. 80 days
  3. 105 days
  4. 23 days

Answer: A. 55 days

The cash operating cycle is inventory days plus receivables days less payables days: 48 + 32 − 25 = 55 days. Adding all three periods would wrongly treat supplier credit as extending the period for which cash is tied up.

4. A seasonal manufacturer adopts an aggressive working capital financing policy. Which description best fits this policy?
  1. All non-current assets and permanent current assets are financed by long-term funds
  2. Permanent current assets are financed by short-term borrowing, while fluctuating current assets use long-term funds
  3. All assets are financed with equity only
  4. Some permanent current assets are financed with short-term funds, increasing refinancing risk

Answer: D. Some permanent current assets are financed with short-term funds, increasing refinancing risk

An aggressive policy uses short-term finance for at least some permanent current asset investment, lowering financing cost in some conditions but increasing liquidity and refinancing risk. Option A describes a more conservative or matching approach, not an aggressive one.

5. A project requires an immediate investment of $100,000 and will generate cash inflows of $60,000 at the end of each of the next two years. If the discount rate is 10% per year, what is the project's approximate NPV?
  1. −$4,100
  2. $4,100
  3. $20,000
  4. $10,000

Answer: B. $4,100

NPV = −100,000 + 60,000/1.10 + 60,000/1.10² = approximately $4,132, or $4,100 to the nearest $100. The undiscounted surplus of $20,000 ignores the time value of money.

More ACCA Financial Management (FM) years

2026202520242023

All ACCA Financial Management (FM) years · ACCA subjects

PassSpark questions are original practice questions written to each exam's syllabus and format, in the style of past questions. They are not official past papers and are not affiliated with JAMB, WAEC, NECO, any university or any exam body.