CA Final AFM Important Formulas Topic-Wise
Mridula Sharma3 May, 2025Share
CA Final Strategic Financial Management (SFM), now referred to as Advanced Financial Management (AFM), is a subject that brings both excitement and anxiety to CA aspirants. It dives deep into the heart of corporate finance with topics that reflect the real-world complexities of financial decision-making.
But here’s the thing, amidst the vast syllabus and endless chapters, CA Final AFM Important Formulas serve as the core foundation that helps you crack problems with speed and accuracy. In the intense atmosphere of the exam hall, having these formulas at your fingertips can help you.
CA Final AFM
The CA Final AFM paper is a gateway to understanding high-stakes financial decisions, the kind that real CFOs, fund managers, and investment bankers make every day. As a CA student, when you study this paper, you’re not just preparing for an exam; you’re stepping into the shoes of financial decision-makers.
From mastering Risk Management and Derivatives to calculating Business Valuations and handling International Finance, every topic teaches you the art of decision-making under uncertainty. It helps you balance logic and intuition. And yes, it can feel overwhelming. But that’s where CA Final AFM Important Formulas swoop in like superheroes. These formulas help you save time, gain confidence, and deliver precise answers.
Whether it’s Interest Rate Risk Management or Security Analysis, there’s a formula that can simplify even the trickiest concept. And if you internalize them well, the exam feels like a guided walkthrough rather than a nerve-wracking puzzle.
CA Final AFM Important Formulas
Check the topic-wise CA Final AFM Important Formulas in the table below. These formulas will not just be your memory hacks but the very tools that separate toppers from the rest.
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CA Final AFM Important Formulas |
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Topic |
Formula |
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Risk Management |
Value at Risk (VaR) = Z-score × Standard Deviation × Portfolio Value |
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Hedge Ratio = Value of position to be hedged / Value of hedge instrument |
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Delta Hedge = Number of shares to hedge = Delta × Number of options |
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Advanced Capital Budgeting |
Net Present Value (NPV) = Σ (Cash Flow / (1 + r)^t) - Initial Investment |
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Internal Rate of Return (IRR): The rate where NPV = 0 |
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Profitability Index (PI) = Present Value of Future Cash Flows / Initial Investment |
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Discounted Payback Period = Time when discounted cash flows recover the initial outlay |
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Security Analysis & Valuation |
Expected Return = Σ (Probability × Return) |
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Standard Deviation = √Σ (Probability × (Return - Expected Return)^2) |
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CAPM (Capital Asset Pricing Model) = Rf + β(Rm - Rf) |
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Dividend Discount Model (DDM) = D1 / (Ke - g) |
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Portfolio Management |
Portfolio Return = Σ (Weight × Return) |
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Portfolio Variance (Two assets) = w1²σ1² + w2²σ2² + 2w1w2Cov1,2 |
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Sharpe Ratio = (Portfolio Return - Risk-Free Rate) / Portfolio Standard Deviation |
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Mutual Funds |
Net Asset Value (NAV) = (Total Assets - Total Liabilities) / No. of units |
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Expense Ratio = Total fund costs / Average assets under management |
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Derivatives |
Futures Price = Spot Price × e^(rt) |
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Option Pricing - Black-Scholes Model |
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Put-Call Parity = C + PV(X) = P + S |
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Forex Management |
Forward Rate = Spot Rate × (1 + Domestic Interest Rate) / (1 + Foreign Interest Rate) |
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Cross Rate Calculation: Exchange rate between two currencies not involving domestic currency |
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Interest Rate Parity = (1 + id) / (1 + if) = Forward/Spot |
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International Financial Management |
Purchasing Power Parity (PPP) = Spot Rate × (1 + Inflation Home) / (1 + Inflation Foreign) |
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Fisher Effect = Nominal Interest Rate = Real Interest Rate + Inflation Rate |
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Interest Rate Risk Management |
Duration = Σ (t × PV of Cash Flow / Price) |
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Modified Duration = Duration / (1 + Yield) |
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Interest Rate Futures Pricing: Based on expected interest rate changes and bond duration |
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Business Valuation |
Enterprise Value (EV) = Market Cap + Debt - Cash |
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FCFF (Free Cash Flow to Firm) = EBIT(1-t) + Depreciation - CapEx - ΔWC |
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FCFE (Free Cash Flow to Equity) = Net Income + Depreciation - CapEx - ΔWC + Net Borrowing |
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Mergers, Acquisitions & Corporate Restructuring |
Synergy Value = Value of Combined Entity - (Value of Acquirer + Value of Target) |
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Post Merger EPS = (Earnings of Acquirer + Earnings of Target) / (Shares of Acquirer + New Shares Issued) |
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Exchange Ratio = Offer Price / Market Price of Target |
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CA Final AFM Important Formulas FAQs
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