Core 2 finance decisions across analysis, proposals, working capital, financing sources, capital structure, and capital budgeting.
Finance in Core 2 supports decisions about cash, working capital, financing, capital structure, and investment projects. Candidates should explain assumptions, compare alternatives, address tax and risk, and recommend an option that fits strategy and liquidity constraints.
Exam emphasis: 15-20%.
flowchart LR
A["Financial objective"] --> B["Assumptions"]
B --> C["Analysis"]
C --> D["Risk"]
D --> E["Financing decision"]
Use this chapter as the financing-and-liquidity layer of Core 2. The recurring work is to identify the financial objective, test assumptions, interpret the analysis, weigh risk and constraints, and recommend a financing or investment action.
| Section | Main question | Study focus |
|---|---|---|
| 4.1 Financial Analysis | What does the analysis show about liquidity, solvency, profitability, efficiency, or cash? | Ratios, benchmarks, trends, cash-flow analysis, comparability, financial state, and management action. |
| 4.2 Financing Proposals | Is the financing proposal complete, reasonable, and aligned with strategy? | Purpose, audience, assumptions, cash timing, constraints, strategic fit, risk disclosure, and monitoring. |
| 4.3 Working Capital | What working-capital driver affects liquidity? | Cash flow, credit policy, inventory, receivables, payables, cash conversion, relationships, and liquidity action. |
| 4.4 Financing Sources | Which financing source best fits the entity’s objectives and constraints? | Cost, risk, control, flexibility, timing, tax facts, entity type, and strategic objectives. |
| 4.5 Capital Structure | Does the financing mix fit risk tolerance, cash flow, and strategy? | Debt, equity, leverage, lease-versus-buy, cost of capital, covenants, ownership, and flexibility. |
| 4.6 Capital Budgeting | Should the entity proceed with, revise, delay, or reject the project? | Project tools, assumptions, tax facts, cash constraints, troubled-entity signs, and risk monitoring. |
Use each section as a decision unit. Identify the case trigger, build any required calculation or comparison, then write the recommendation in management language. Core 2 rewards candidates who connect numbers, risks, strategy, liquidity, and operational constraints.
| Trap | Better response |
|---|---|
| Producing a calculation without a decision. | Interpret the result and recommend the action it supports. |
| Listing qualitative factors without ranking them. | Tie each factor to strategy, risk, feasibility, or stakeholder impact. |
| Ignoring implementation. | State the control, KPI, accountability, or follow-up action needed after the recommendation. |