How to Prepare for FM & SM (Financial Management and Strategic Management)

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Becoming a Chartered Accountant is the only aim of aspirants pursuing this profession and definitely cracking it is not just a walk in the park. However, if our strategies, our method of studies, our way of going ahead is on the right track, then certainly it is not as difficult a task as it seems.

We need to focus thoroughly on certain techniques or tricks to conquer the challenge and prepare for FM & SM. FM & SM is one of the important and core subjects of the CA Intermediate course. If one follows a practical as well as a theoretical approach and prepares/attempts in a planned manner, then it can be a good scoring subject for most students.

So, if you are preparing for FM & SM (CA Inter), then this article is just for you. Here, we are sharing some views which can help you while preparing for this subject so as to secure maximum marks. No doubt it’s a scoring subject but one needs to have 100% conceptual clarity of all the concepts—be it the theoretical part or practically oriented portion—followed by a lot of hard and smart work, calculations, and deep understanding which will lead you on the path of success.

Table of Contents

Introduction

As the name suggests, FM means managing finance which involves taking strategic decisions from a high-level perspective, and hence we should always keep this point in our mind to understand better. FM & SM now forms part of Group 2 of the CA Intermediate syllabus.

Previously, the paper was FM & ECO (Economics for Finance), but with the new curriculum implemented by ICAI, it now includes FM & SM where Financial Management carries 50 marks weightage and Strategic Management carries 50 marks.

Now the focus of ICAI has shifted to knowledge-based testing towards application and analysis-oriented questions.

Approach for Effective Study: Strategic Management (SM)

Strategic Management is basically a new subject that focuses on how to formulate, implement, and evaluate cross-functional decisions that enable an organization to achieve its objectives. The SM part is mostly theoretical but highly logical and structured.

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Topics covered include:

Introduction to Strategic Management
Dynamics of Competitive Strategy
Strategic Management Process
Corporate-Level Strategies
Business-Level Strategies
Functional-Level Strategies
Organization and Strategic Leadership
Strategy Implementation and Control

These chapters contain important theoretical knowledge about how business environments work, what strategies corporates apply for long-term success, and how leadership plays a key role. Each unit should be thoroughly read and understood, not mugged up. SM is an extremely scoring portion provided one has clarity of flowcharts, terminologies, and strategic frameworks.

One Core Mantra which applies to all the chapters is that you should be very quick while doing your final revisions and if possible just prepare your revision notes where you can easily find the gist of important concepts in each topic.

I would like to tell you one strategy which certainly helps you in retaining all your theoretical concepts. Just don’t mug up the theory because mugging up is not a permanent solution.

What you can do is when you first understand the chapter either in class or at the time of self-study, you can just record the concept in your voice and at the time of final revision when you hear that audio you will be able to quickly recall all the concepts or highlights from that concerned topic and it will definitely save your time and boost your confidence.

Financial Management (50 Marks)

Now let’s move to understand the most important and scoring part of this particular paper i.e. Financial Management which carries 60 marks of weightage in exams.

In order to crack the FM part easily one must have a core understanding of the subject and deep knowledge of each and every chapter in this subject. It will surely open the doors for CA Finals too.

Here comes the important question in the minds of thousands of students: What should be the effective planning to study this subject and what should be our way or approach to study this subject?

So let’s begin with the content or chapters you are going to study in Financial Management part. The list of chapters is as follows:

SCOPE AND OBJECTIVE OF FINANCIAL MANAGEMENT
TYPES OF FINANCING
FINANCIAL ANALYSIS AND PLANNING – RATIOS ANALYSIS
COST OF CAPITAL
FINANCING DECISION – CAPITAL STRUCTURE
FINANCING DECISION – LEVERAGES
INVESTMENT DECISIONS
RISK ANALYSIS IN CAPITAL BUDGETING
DIVIDEND DECISIONS
MANAGEMENT OF WORKING CAPITAL

Above are the chapters which you are going to study in the Financial Management part and all the concerned chapters require deep practical and conceptual clarity. So as a CA student, you must be a smart worker along with a hard worker in order to attain your goals successfully.

While preparing for any practical subject, you first have to decide how much time you have to devote to this particular subject and what are the concerned topics in this subject so that you can decide your source of study for the subject because time management is the utmost required factor not only for cracking the exam but to crack it with good marks.

I personally suggest you prepare for FM & SM for exemption and trust me it is not at all a difficult task to score exemption provided your strategies and techniques to prepare should be absolutely perfect. So don’t waste your precious time and instead go for expert guidance where all areas are covered by the experts of the subjects.

You must know the derivations of all formulas in order to solve any kind of practical-oriented problem. Always remember that whatever we are studying, all the efforts we are putting will ultimately give fruitful results to us only if we perform our best in those crucial hours of our life which will decide our future to be.

Practicing your way to perfection is the key to your success. After weeks, months of hard work, confusion, and all the physical as well as mental stress, we appear in examinations. So just don’t try to think that let’s give a chance only; rather make it your first and final attempt and come out with flying colours and like shining stars.

CA Inter FM SM Pendrive Classes

Some of the strategies to be followed during exam time or while making the final revision of the subject are as follows:

Begin with the basic theory and formula in each chapter which will help you in remembering all the concepts which have been taught to you in your classes and your confidence level will be high.
Classify the chapters as easy and difficult in your opinion and then start preparing for easy chapters first like dividend decision, leverages etc. These are topics which are easy to retain if concepts are clear. So these are highly recommended topics to begin with.
Vast topics like budgeting and working capital management require more attention, so always take these chapters in between because initially when you start with easy chapters you have already gained some confidence in the subject. Then practice for these topics and always try to read the content first and then start solving practical problems. Solving problems just after reading is highly recommended for higher and longer retention.
While studying capital budgeting, thoroughly practice problems on PB period, PI, ARR, NPV and IRR techniques as problems on these are highly expected from an exam point of view.
Try to make short summaries in parallel while solving sums which will enable you to summarise and remember all the important steps and formulas and save some time. If you make the summary in your own handwriting then it will work like RAM BAN during exam time.

And don’t forget ICAI Study Materials.

At the end, my view is that though FM is considered a scoring subject, at the same time it can confuse students with so many formulas and variety of concepts. So it can be made very easy with the right guidance and direction, practical approach, and smart study.

Wish you all the Best and have Good Luck!