Review of CPA Canada Finance Elective

I’ll guide you through the key aspects of CPA Canada’s Finance elective module, including its structure, assignments, range of topics, examination, and study tips to help you pass.

Related readings:

What’s Finance elective?

When you finish both Core modules in the CPA Canada Professional Education Program (PEP), you will choose two elective modules out of four potential options: Assurance, Taxation, Performance Management (PM), and Finance. Completing two electives is required before completing the Capstones 1 and 2, and the Common Final Exam (CFE). Your two chosen electives can be completed in any order.

The Finance module is designed to test on the competencies required to perform financial analysis, including finance policies, investments, and evaluating financing decisions. Finance elective can be taken by anyone, but it’s usually not taken by those in public practice. It’s recommended to take Finance and PM electives together, as opposed to Finance with Audit or Finance with Tax, due to the similarities in PM/Finance competencies.

While previous technical topics in the Core modules can still be tested, the primary competency is Finance.

Examples of Finance topics include:

Working Capital management
Sources of Financing (SOF)
Leasing decisions (NAL)
Capital Budgeting (incl NPV, IRR, PB)
Time Value of Money (TVM)
Cash flow analysis (CF)
Ratio analysis (liquidity, solvency, profitability)
Stock-based compensation (SBC)
Capital structure decisions
Determining the cost of capital (incl CAPM, WACC)
Financial markets
Investment and portfolio diversification
Derivatives and risk management
Valuations (incl. asset based, capitalization of earnings, capitalization of cash flows, discounted earnings, discounted cash flow, market based / multiples, intangible assets)

Similar to Core modules, Finance module is held online, with all assignments, readings and quizzes taken on the website Desire 2 Learn (D2L). You’ll get access to the materials about a week before the module start date.

How long is it?

The normal Finance module is 8 weeks. However, there is extended version where you can complete it over a 5 -month period. This is good for students who prefer a slower pace of study.

You can also challenge the Finance module, where you skip the entire module and just take the exam. This is allowed only in special circumstances, such as for internationally trained accountants under MRA/MOU.

Is there an instructor?

Similar to Core modules, there is an online facilitator.

Finance module also has Module Workshop (MWS). This mandatory two-day event has presentations and activities by a session leader. The activities include review of technicals and case writing. I previously worked as a session leader with CPA Canada.

Before attending the workshop, you must complete and submit pre-work to D2L dropbox.

What are the assignments?

Finance module has weekly assignments that consist of:

Multiple-choice questions (MCQs)
Integrative problems (IPs)
Practice cases (PCs)

MCQs are small problem-based questions that test on technicals. The IPs are short-answer problems that test the technical material learned in the weekly unit. The PCs range from 80-minute to 120-minutes, they are designed to simulate the actual Finance elective exam.

Below is an example of Finance PC:

The IPs and PCs are to be completed using Microsoft Word and Excel, and uploaded to D2L weekly. The deadline is typically Friday night.

Finance module exam tends to be harder than the PCs, so I recommend practicing with retired exam cases and mock exam simulations.

How is it graded?

Unlike Core modules, where you had 5 AOs, Finance module cases have 6 to 8 AOs.

To be eligible to write the exam, you need to get at least 75% total grade from your weekly assignments. The course is weighed as follows:

IPs: 30%
PCs: 30%
Unit quizzes and MWS pre-work: 30%
MWS participation: 10%

Reaching this 75% threshold is not a challenge for most students. Passing the exam is the hardest part and it should be your main focus.

What’s the syllabus?

The syllabus lists the weekly readings and assignments. You can use the syllabus as a checklist and narrow down topics to study. To download the Finance syllabus, check here.

What is the Finance exam like?

The Finance elective exam is 4 hours and consists of 15 MCQs and two cases for a total of 200 minutes. The maximum time for any one case will not be more than 120 minutes and the minimum will not be any less than 80 minutes.

All four electives (Assurance, PM, Finance, Tax) have this examination format (15 MCQ, 2 cases), which is different from Core modules, where you had 75 MCQs and one case. As you can see, the focus is being shifted from MCQs to case writing. In the CFE, it’s only cases.

Below is the exam blueprint that shows the weighing for the Finance MCQs. As you can see, it’s 100% Finance focused.

Similarly, the cases will test mainly Finance, but will integrate 1 or 2 other competency areas (ie, Assurance, PM, FR, SG, MA). While these other competencies can officially make up 50% of the cases, it’s typically around 20-30%, so only 2 or 3 AOs in each case.

All prior learnings from Core 1 and Core 2 are still testable in your exam.

How many tries do I get?

Similar to Core 1/2 modules, you have 3 attempts to pass. However, unlike core modules, after 3 unsuccessful tries, you don’t get de-registered from the elective. Instead, you can switch your elective and try 3 more times in a different elective.

What are the textbooks?

The Finance module follows the same Learning EBooks as in Core modules. Here is more information on how to download the CPA Canada Learning eBooks.

Unlike Core modules, the “cheat sheet” given in the exam will NOT have the common ratios. You can download and compare Core and Elective cheat sheets (“Examination Reference Schedules”) here.

What should I study?

Because this is an elective level exam, the biggest technical portion is that elective, ie Finance area. I suggest spending most of your time studying the Finance topics. Electives test depth of knowledge, so the complexity of the AOs are higher than what you’ve seen in Cores.

I give more tips on studying for Finance here.

What’s the Finance pass rate?

The Finance pass rate is around 89%.

Why do students fail Finance?

Statistically, more students pass Finance than the Core modules (see pass rate above). However, some parts of Finance module can be more challenging. Here are the top challenges most students get:

1) Time management. Like other modules, Finance is a self-lead course, which means you are responsible for managing your time, planning your readings, and understanding the material. Because the exam will have 2 cases, you must monitor your time effectively and not spend too much time on one case and less on the other. There are also lots of calculations like in Core 2. These calculations can be lengthy, so students end up spending lots of time on quants and running out of time in the end.

2) Applying templates/identifying calculations. Because of the volume of calculations in Finance, it’s challenging to think about the problem and set it up in Excel in a short amount of time. Having weak technicals and poor formatting are key challenges. However, there’s repetition of calculations in the PCs, meaning you are going to see the same quants come up multiple times in PCs. I recommended creating templates and step-by-step formulas on how to solve each common calculation. This will help you solve quants quicker during the exam.

3) Bad qual and integration of case facts. Most students think of calculations when they think of Finance, but many of these calculations require some sort of qual analysis. For example, when performing ratio analysis, you will often be asked to discuss the results. This includes saying whether the ratio is optimal or needs improvement, and explaining why. You need to go beyond saying that the company is in good or bad shape, you must show depth of knowledge by discussing what it means (implication, impact) and how to improve (recommendation). A good formula to use is: case fact + interpretation/explanation + impact (operating and financial) + integration. I explain this in more detail here.

4) Not providing recommendations. A big part of this elective is to have understand the company performance, policies, preferences and to give recommendations. For example, when asked to evaluate different sources of financing, you’re often required to provide quantitative and qualitative analysis, and overall recommendation on which one is better for the company. Students often miss recommendation part which drops them to RC.

Overall, time management, incorrectly identifying the quants tool, lack of case facts, and missing recommendations are the biggest reasons students fail. If I had to pick one, quants is the biggest obstacle.

Do I need a tutor?

Hiring a tutor is a personal preference and it depends on your circumstances. A CPA tutor brings their expertise, helping to identify your weaknesses, reinforce your strengths, teach complex topics, reveal what topics are most tested through analyses of the Competency Map and exam blueprint, thus helping you speed up your study time and increase your chances of passing the exam.

If you attempt Finance by yourself and don’t pass it, I suggest that you consider getting a tutor. But if you are successful, then you can keep doing what works for you.

Extra resources

Extra Finance resources are available at Finance Lessons course.