PassSpark

ACCA Financial Management (FM) 2026 past questions and answers

This 2026 ACCA Financial Management (FM) set has 19 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2026 set with instant marking.

Practise the full 2026 setTimed exam mode

Sample ACCA Financial Management (FM) 2026 questions

1. A listed engineering group is considering a project that will reduce reported earnings per share for two years but is forecast to generate a positive net present value at the company’s appropriate cost of capital. Which decision best supports the finance function’s primary objective?
  1. Reject the project because earnings per share must rise every year
  2. Accept the project only if it increases this year’s dividend
  3. Assess whether accepting it will increase shareholder wealth over time
  4. Accept the project only if it lowers the company’s tax charge

Answer: C. Assess whether accepting it will increase shareholder wealth over time

A positive NPV indicates that the project is expected to add value when assessed using an appropriate cost of capital, supporting the objective of shareholder wealth maximisation. A short-term EPS fall alone does not establish that the project destroys value.

2. A retailer has a large floating-rate bank loan. The central bank raises its policy rate, and the loan rate resets immediately in line with market rates. What is the most direct financial effect on the retailer, assuming the loan balance is unchanged?
  1. Its interest expense will rise, reducing profit before tax and cash available for other uses
  2. Its interest expense will fall because higher rates reduce the bank’s funding cost
  3. Its interest expense will stay fixed until the loan principal is repaid
  4. Its tax charge will automatically fall by the full amount of the rate increase

Answer: A. Its interest expense will rise, reducing profit before tax and cash available for other uses

A floating-rate loan reprices with the specified market rate, so a rise in rates increases interest expense on the unchanged balance. The tax effect, if any, applies only to the tax-deductible interest and does not automatically offset the whole increase.

3. A wholesaler has an average inventory holding period of 50 days, an average receivables collection period of 40 days and an average payables payment period of 35 days. Using the cash operating cycle formula, what is its cash operating cycle?
  1. 45 days
  2. 55 days
  3. 85 days
  4. 125 days

Answer: B. 55 days

The cash operating cycle is inventory days plus receivables days less payables days: 50 + 40 − 35 = 55 days. Adding rather than subtracting the payables period would incorrectly give 125 days.

4. A seasonal manufacturer uses short-term borrowing to finance peak-season inventory and also part of its minimum year-round inventory. It uses long-term finance for its non-current assets. Which working capital financing policy does this most closely describe?
  1. A conservative policy, because all current assets are funded long term
  2. A matching policy, because every asset is funded for exactly its life
  3. A neutral policy, because seasonal inventory is temporary
  4. An aggressive policy, because short-term finance funds some permanent current assets

Answer: D. An aggressive policy, because short-term finance funds some permanent current assets

An aggressive policy uses short-term finance for at least some permanent current assets as well as fluctuating requirements, increasing refinancing and liquidity risk. A matching policy would generally use long-term finance for permanent current assets and short-term finance for temporary requirements.

5. A manufacturer is evaluating a new production line that would occupy a warehouse it already owns. The warehouse could otherwise be rented to a third party for $24,000 each year. A market study costing $8,000 was completed last month, and the accountant has allocated $15,000 of existing head-office overhead to the project. Which item should be included as a relevant annual project cash flow?
  1. The $24,000 rental income forgone by using the warehouse
  2. The $8,000 cost of the completed market study
  3. The $15,000 overhead allocation, even though total overhead will not change
  4. The project’s share of existing interest expense, even if financing is unchanged

Answer: A. The $24,000 rental income forgone by using the warehouse

The rent forgone is an opportunity cost caused by accepting the project and is therefore relevant. The completed study is a sunk cost, while unchanged allocated overhead and financing costs are not incremental project operating cash flows.

More ACCA Financial Management (FM) years

2025202420232022

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.