CA Inter FM And SM Exam Analysis Jan 2026 by CA Sunil Keswani

The CA Inter Financial Management (FM) and Strategic Management (SM) exam for January 2026 presented a mixed bag for students. While the Multiple Choice Questions (MCQs) were largely straightforward, the descriptive FM section posed challenges due to its length and the technical nature of certain questions. 

This analysis provides a detailed breakdown of the paper, highlighting key solutions and areas of difficulty, aiming to offer clarity on the exam's structure and expected answers.

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CA Inter FM And SM Exam Analysis Jan 2026

The CA Inter Financial Management (FM) and Strategic Management (SM) exam conducted on 17th January 2026 offered a mixed experience for students. While the MCQ section across both subjects was mostly easy and scoring, the descriptive section of FM proved challenging due to lengthy questions and a few technically demanding areas. Strategic Management questions were comparatively manageable.

This analysis breaks down the exam structure, highlights key problem areas, and provides clarity on expected answers and overall difficulty.

Financial Management (FM) - MCQ Solutions

The FM MCQs were broadly considered very easy, with one question presenting a data ambiguity.

1. Convertible Debenture Valuation (Approximation Method)

• The challenge involved selecting the correct base price for calculation. Using the given market price of 150 resulted in a non-matching answer.

• The correct calculation required using the cost price of 100 to align with the options.

• Correct Answer: 30.74

2. Weighted Average Cost of Capital (WACC)

• This calculation first required determining the future value of shares (RV), given 4 shares per debenture, a current price of 120, and a 5% growth rate over 5 years, yielding an RV of 612.

• Costs of Equity (Ke) and Preference shares (Kp) were straightforward to calculate.

• After determining market values and respective costs for each component, the WACC was computed.

• Correct Answer (WACC): 17.02%

3. Market Price per Share (MPS)

• This question provided Earnings Available for Equity and the Price-to-Earnings (P/E) Ratio.

• MPS was found by multiplying the Earnings Per Share (EPS) by the P/E Ratio.

• Correct Answer: 168

4. Linter's Dividend Model

• The problem provided D1 (Dividend at year-end 1), requiring the calculation of D0 (Dividend at year 0).

• D0 was derived using the formula: EPS × Target Payout Ratio.

• Correct Answer (D0): 40

5. Dividend Reinvestment and Number of Shares

• This question was exactly the same as a problem found in the study module.

• The given share price was cum-dividend. The calculation necessitated using the ex-dividend price.

• The dividend amount was then reinvested to acquire additional shares.

• Correct Answer (Total Shares): 44,800

6. Cash Management (EOQ Model Variant)

• This was a fundamental cash management problem where the Annual Cash Requirement ('A') was the unknown variable to be calculated.

• Correct Answer (A): 1,800,000

Strategic Management (SM) - MCQ Solutions

The SM multiple-choice questions, encompassing both case-scenario-based and individual questions, are detailed below.

• Case Scenario-Based MCQs:

1. Type of diversification: Concentric Diversification

2. Factor causing a shift in demand: Socio-cultural shift

3. Answer to the third question: Product

4. Answer to the fourth question: Strategic Intent

5. Answer to the fifth question: Inbound Logistics

• Individual MCQs:

1. A cafe offering discounts on weekdays to manage weekend overcrowding is an example of: Synchro-marketing.

2. The question concerning the 'Herbal Care' company was about: Clear direction and long-term focus to move ahead.

3. The question about 'Urban Reality' in Tier-2 cities relates to: Strategy Implementation.

Descriptive Paper Analysis

This section provides an analysis of the descriptive questions from the exam, highlighting their nature and perceived difficulty.

Question 1 Analysis

This question was generally considered manageable but time-consuming.

• Part A (Ratio Analysis): A standard problem requiring the calculation of missing ratios. It was assessed as being of average difficulty but lengthy.

• Part B (Factoring): This 5-mark question was identical to a problem discussed in class/materials, making it highly approachable for prepared students.

• Part C (Dividend Policy): The question uniquely combined both the Gordon and MM models, deviating from the anticipated sole focus on the MM model. Despite this, it was assessed as manageable.

Question 2 Analysis

• Part A (Leverage): This 5-mark question was straightforward and easily manageable, posing little difficulty.

• Part B (Capital Budgeting): Although solvable, this question was very time-consuming for its 5-mark weightage. It involved a multi-step calculation process:

1. First, calculate the WACC using the provided data (8% cost and tax rate).

2. Then, use the computed WACC to evaluate the project based on the given Profit Before Depreciation and Tax (PBDT).

Question 3 Analysis

• Part A (Ratio Analysis): This 8-mark question was highly unusual, being completely different from typical problems and unprecedented at this level. It demanded a highly detailed, in-depth interpretation and analysis. Many students likely chose to skip this question in favour of the alternative theory question due to its complexity.