How to prepare for fm & eco

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 & eco. FM & ECO 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 prepared/attempted in a planned manner, then it can be a good scoring subject for most students. So, if you prepare for FM & ECO (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.

Introduction:

As the name suggests, FM means managing finance which involves taking strategic decisions a high-level perspective, and hence we should always keep this point in our mind to understand better. Previously this subject was not in the syllabus and there were only 7 subjects at the CA INTER level.  However, the biggest change introduced by ICAI 2 years back was introducing a new subject in the CA INTER syllabus, and now 8 papers are there, 1 of them being FINANCIAL MANAGEMENT & ECONOMICS FOR FINANCE  where financial management caries 60 marks weightage and economics for finance carries 40 marks.

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

Approach for effective study:

ECONOMICS FOR FINANCE is basically a new subject that ICAI has introduced in the curriculum. Now we are going to discuss topics concerned for Economics for finance and here are the concerned topics:

DETERMINATION OF NATIONAL INCOME

PUBLIC FINANCE

MONEY MARKET

INTERNATIONAL TRADE

Above chapters further containing many sub units explain the concepts of economics as a whole and provides in depth knowledge about the markets, investments, fiscal policies, monetary policies framework etc.

There are different approaches to cover each of the topics and the most important thing you need to understand is that it is not only a theoretical based portion but also covers practical aspects in which you can score good marks if studied carefully. Though it is an interesting and scoring subject, but it needs in depth conceptual clarity as well.  Now let’s have a chapter wise look to understand the effective approach to study.

CHAPTER.1- DETERMINATION OF NATIONAL INCOME:

In this chapter you will come to know about working of our economy. You need to make this unit very strong because it attracts a substantial portion from examination point of view in both ways i.e. theory as well as practical. There are few theories & formulas given in this chapter which you need to understand carefully along with very deep understanding. You will find it an easy and scoring topic once you are clear with all the concepts.

CHAPTER.2-PUBLIC FINANCE

In this chapter you will be able to understand the role of government as to how government frames its policies in order to attain economic growth and also the concepts of market failure and measures taken by government to correct those failures. This is a relatively easy chapter to grab and near about 20% weightage is expected in exams from this chapter. 

CHAPTER.3-MONEY MARKET

It is also a mixture of both practical and theory where both parts are interesting and is full of knowledge. You will also come to know about the multipliers, the currency ratios as well as the money supply in market. You can easily expect one or two theory based questions from this chapter.

CHAPTER.4-INTERNATIONAL TRADE

As the name suggests, here you will study about the various theories of trades, various trade agreements, exchange rates and investments in foreign markets.

For students who prepare for fm & eco, this Economics for Finance portion mainly consists of a theoretical approach though some practical approach too is needed and contains all important topics from an examination point of view

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 while at the time of self study, you can just record the concept in your voice and at the time of final revision when you will 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.

Now let’s move to understand 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 be having 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 that 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 and the list of chapters are 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 ANALYSISIN CAPITAL BUDGETING

-DIVIDEND DECISIONS

-MANAFEMENT 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 hard work in order to attain your all goals successfully.

While preparing for any practical subject, you first have to decide that how much time I have to devote on 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 & eco 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  examination 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.

Some of the strategies to be followed during exams time or making final revision of the subject is as follows:

1. 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.
2. Classify the chapters as easy and difficult in your opinion and then start preparing for easy chapters first like dividend decision, leverages etc. are the topics which are easy to retain if concepts are clear. So these are highly recommended topics to begin with.
3. Vast topics like budgeting, 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 and 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.
4. While studying capital budgeting, thoroughly practice problems on PB period, PI, ARR, NPV and IRR techniques as problems on these are highly expected from exam point of view.
5. 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 will make summary in your own handwriting then it will work like RAM BAN during exam time.
6. and don’t forget ICAI Study Materials

At the end, my view is that, though FM is considered a scoring subject but 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 a Good Luck.