Financial Management (FM)
150 questions mapped to the official ACCA FM syllabus (S26-J27). Covers working capital management, investment appraisal (NPV, IRR, inflation and tax), business finance and the cost of capital, business valuations, and risk management. Filter by section, work at your own pace, see explanations for every answer, or switch to Exam Sim mode for a timed FM mock exam under real exam conditions.
→ FM Common Mistakes & Examiner Insights: the errors the examiner flags every sitting.
→ ACCA FM Pass Rate: 48% at the most recent reported sitting, and what that figure actually reflects.
The FM exam format
3 hours, 100 marks in total. All questions are compulsory. The pass mark is 50%.
| Section A | 15 objective test questions worth 2 marks each | 30 marks |
|---|---|---|
| Section B | 3 case questions, each with 5 objective test questions worth 2 marks | 30 marks |
| Section C | 2 constructed response questions worth 20 marks each, mainly on working capital, investment appraisal and business finance | 40 marks |
Source: the official ACCA syllabus and study guide for this paper. Always check the current version on the ACCA website before you sit.
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FM Formula Sheet: all key formulas on one printable A4 page. Free to download, or see what's on it.
↓ Download PDFSample FM questions
Three questions from this bank, each with its answer and worked explanation. The quiz above draws from all 150.
Which of the following is a relevant cash flow when appraising a new investment project?
- An incremental future operating cash flow that arises only if the project goes ahead
- Market research costs already paid before the decision is taken
- Depreciation charged on the new machinery under the company's accounting policy
- A reallocation of existing head-office overheads to the project
Show answer and explanation
Answer: A. Relevant cash flows are future, incremental and cash-based — they change as a direct result of accepting the project. Option B is a sunk cost, already incurred and therefore irrelevant. Option C is a non-cash accounting allocation and is excluded (though the tax effect of capital allowances is relevant). Option D is an apportionment of overheads that would be incurred regardless, so it is not incremental. Only option A satisfies all three tests of relevance.
Which statement best describes the conflict between liquidity and profitability in working capital management?
- There is never any conflict, because holding more working capital always increases profit
- Holding more cash and inventory improves liquidity but ties up funds in low-return assets, which tends to reduce profitability
- Reducing working capital always improves a company's liquidity, whatever its size or industry
- Liquidity and profitability are simply two names for the same thing
Show answer and explanation
Answer: B. Working capital management requires a balance. Higher current assets — more cash, larger inventories, more generous customer credit — reduce the risk of running short of funds (better liquidity) but earn little or no return, which lowers profitability. Holding lean working capital lifts returns but raises the risk of illiquidity. Option A and option C are false generalisations (the relationship is a trade-off, not one-directional), and option D wrongly equates two distinct concepts.
Compared with equity finance, debt finance (such as bonds or bank loans) typically:
- Carries a higher required return than equity for the same company
- Gives the lender voting control over the company
- Is cheaper, because interest is tax-deductible and lenders bear less risk than shareholders
- Never has to be repaid by the company under any circumstances
Show answer and explanation
Answer: C. Debt is generally cheaper than equity for the same company because lenders bear less risk (ranking ahead of shareholders and often holding security) and because interest is tax-deductible, creating a 'tax shield'. Option A is the wrong way round (debt's required return is lower than equity's), option B is untrue (lenders do not normally have voting control), and option D is false — debt usually carries a repayment obligation and interest must be paid regardless of profits.
About this question bank
150 questions across 7 syllabus sections, each mapped to a reference in the official ACCA syllabus for FM and each with a worked explanation. 104 are multiple choice and 46 are numerical, where you work the answer out before choosing it.
- Written to the ACCA syllabus and study guide for exams from September 2026 to June 2027.
- Spotted a mistake? Report it and it will be corrected.
| Syllabus section | Questions |
|---|---|
| A: FM function & objectives | 18 |
| B: Economic environment | 15 |
| C: Working capital | 28 |
| D: Investment appraisal | 30 |
| E: Business finance | 28 |
| F: Business valuations | 18 |
| G: Risk management | 13 |