100+ Free HKSI Paper 11 Practice Questions

Overview of the corporate finance industry

Roles and functions of financial intermediaries, direct versus indirect financing, equity, debt, hybrids and derivatives, types of organisation, market participants and their liability, globalisation of financial markets, ethics and corporate governance, and the causes and consequences of major failures in the finance industry.

Accounting and financial statement analysis

Accounting assumptions and principles, accrual accounting, HKFRS and IFRS standards and risk disclosure, the statement of financial position, income statement and cash flow statement, ratio and cash-flow analysis, cosmetic accounting, and the treatment of business combinations, securitisation, derivatives and foreign currency translation.

Principles of corporate finance

Uncertainty and risk, the time value of money, risk and return, interest and discounting, cost of capital and methods of estimating the cost of equity, financial leverage and capital structure, capital budgeting and investment appraisal (NPV, IRR, payback), corporate collapse, and infrastructure finance.

Equity financing

Ordinary, preference, non-voting and dual-class shares, the special features of Hong Kong and Mainland markets, options, warrants and hybrids, rights issues and incentives, the capital-raising and IPO process including prospectus, underwriting, SEHK vetting, marketing and allocation, ESG matters, venture capital and private equity, leveraged and management buy-outs, and corporate governance.

Debt financing

Short-term versus long-term and secured versus unsecured debt, bilateral and syndicated loans, commercial paper, medium-term notes, bonds and convertible bonds, asset-based finance and securitisation, the loan approval process, determining the appropriate debt structure, loan pricing, international debt markets, and managing debt over its life.

Business valuation

The purpose and principles of valuation, professional versus ad hoc valuation, undiscounted and discounted valuation techniques, understanding the company, its industry and competitive position, pricing of new-economy companies and multiples, and valuation in special situations such as takeovers, mergers, liquidations and divestitures.

Mergers and acquisitions

Motives for and the social and economic implications of takeovers, the players involved, structuring a takeover and its mechanics, takeover strategies, pre-emptive and reactive defensive strategies, legal issues including the Codes on Takeovers and Mergers, and directors' duties in a takeover.