CB1: Business Finance: Exam CB1 Prep

Calculate present and future values using simple and compound interest.

Calculate the present value of annuities, perpetuities, and growing perpetuities.

Apply net present value (NPV) to compare cash flows occurring at different times.

Calculate the expected return and standard deviation of a portfolio to demonstrate the risk-return relationship and diversification.

Describe the three forms of the Efficient Market Hypothesis and their implications for investment strategy.

Identify the functions of financial intermediaries and markets using real-world examples of fund channelling.

Explain the principal-agent problem and its implications for corporate governance.

Describe the key principles of corporate governance and identify their application in real-world scenarios.

Explain the roles of the board of directors and its committees, linking each to specific financial oversight responsibilities.

Analyse ethical dilemmas in business finance through case-based scenarios.

Compare sole traders, partnerships, LLPs, and limited companies by liability, taxation, and financing characteristics.

Analyse the financial implications of limited liability through a creditor-loss scenario.

Compare the characteristics of public and private limited companies.

Distinguish between direct and indirect taxes, describing their economic effects.

Calculate corporate tax liability given taxable profits, capital allowances, and loss relief.

Calculate income tax for an individual applying personal allowances and tax bands.

Calculate capital gains tax on the disposal of assets, including indexation allowance.

Calculate value-added tax (VAT) liability for a business and determine the net impact on cash flows.

Demonstrate through calculation how the tax-deductibility of interest payments influences corporate financing decisions.

Describe the role of stock exchanges and the requirements for a public listing.

Compare the financial characteristics, risks, and trade-offs of ordinary shares, preference shares, and debt instruments.

Calculate the market price of a fixed-interest bond using discounted cash flow.

Calculate the yield to maturity (YTM) of a bond given its market price.

Analyse the costs and financial implications of an initial public offering (IPO) for the issuing company.

Explain the mechanics of a rights issue and calculate the theoretical ex-rights price and the value of a right.

Describe the features of convertible bonds and calculate their conversion value.

Describe the features of warrants and calculate their value upon exercise.

Compare the costs and features of bank overdrafts and term loans using numerical examples.

Calculate the effective annual cost of forgoing early payment discounts in trade credit.

Describe the mechanics of leasing and hire purchase, identifying the relevant after-tax cash flows.

Perform a discounted cash flow analysis to decide between leasing and buying an asset.

Calculate the effective cost of factoring and invoice discounting as sources of short-term finance.

Illustrate the mechanics of securitisation using a numerical example of cash flow transformation.

Compare crowdfunding and peer-to-peer lending with traditional financing using cost and return analysis.

Explain the purpose of financial statements and identify their main users.

Demonstrate through numerical examples how fundamental accounting concepts (going concern, accruals, consistency, prudence) affect reported figures.

Define the elements of financial statements (assets, liabilities, equity, income, expenses) and apply the accounting equation.

Apply the double-entry bookkeeping system to record basic business transactions.

Distinguish between capital expenditure and revenue expenditure with examples.

Prepare a trial balance from a set of ledger accounts.

Identify the key components of an audit report and the main regulatory standards governing financial reporting.

Calculate depreciation using straight-line and reducing balance methods.

Account for accruals and prepayments in financial statements.

Account for provisions and bad debts in financial statements.

Account for inventory using FIFO and weighted average cost methods.

Prepare a statement of profit or loss from an adjusted trial balance.

Prepare a statement of changes in equity.

Prepare a statement of financial position from an adjusted trial balance.

Prepare a statement of cash flows using the indirect method, classifying items into operating, investing, and financing activities.

Identify when consolidated group accounts are required and explain their purpose.

Calculate goodwill arising on the acquisition of a subsidiary.

Calculate non-controlling interest at the acquisition date and at the reporting date.

Prepare a consolidated statement of financial position incorporating goodwill and non-controlling interest.

Describe the key regulatory principles governing insurance company accounts.

Calculate and interpret key items specific to bank accounts, such as capital adequacy ratios.

Describe the key regulatory principles governing bank accounts.

Calculate key profitability ratios (e.g., return on equity, ROCE, profit margins) from financial statements.

Calculate and interpret liquidity ratios (e.g., current ratio, quick ratio).

Calculate and interpret gearing and coverage ratios (e.g., debt-to-equity, interest cover).

Calculate and interpret efficiency ratios (e.g., asset turnover, inventory days, receivable days).

Calculate and interpret key investor ratios (e.g., EPS, P/E ratio, dividend yield).

Perform trend analysis and common-size analysis on financial statements to assess performance over time.

Apply ratio analysis to a set of financial statements and critically evaluate the limitations of the analysis.

Construct and interpret payoff diagrams for forward and futures contracts.

Calculate the profit or loss on long and short positions in futures and forwards.

Construct and interpret payoff diagrams for call and put options.

Calculate the profit or loss on long and short positions in call and put options.

Apply the put-call parity relationship to determine the price of a European option.

Calculate the net cash flows exchanged in an interest rate swap and a currency swap.

Demonstrate how to hedge currency risk using forwards and currency swaps.

Demonstrate how to hedge interest rate and equity price risk using derivatives.

Estimate the cost of equity using the Capital Asset Pricing Model (CAPM).

Estimate the cost of equity using the Dividend Growth Model.

Calculate the before-tax and after-tax cost of debt.

Calculate the weighted average cost of capital (WACC).

Apply the Modigliani-Miller propositions to calculate the effect of leverage on firm value and WACC, with and without tax.

Apply the trade-off and pecking order theories to analyse a company's capital structure decisions.

Demonstrate dividend irrelevance numerically and analyse factors that influence dividend policy in practice.

Analyse the financial impact of share buybacks as an alternative to dividends on EPS and share price.

Calculate the after-tax cash flows of a capital project, incorporating corporation tax and capital allowances.

Calculate the payback period and discounted payback period for a project.

Calculate the net present value (NPV) of a project and apply the NPV decision rule.

Calculate the internal rate of return (IRR) of a project and evaluate its limitations.

Incorporate inflation into capital project appraisal calculations using real and nominal approaches.

Perform sensitivity analysis on a project's NPV to identify key variables.

Analyse the motives for mergers, acquisitions, and corporate restructuring.