Strategy for Financial Management for Commerce Optional

If you are a UPSC aspirant and your optional subject is Commerce and Accountancy, Financial Management (FM) in paper one becomes the most important subject. Reasons for the same are-

  • This subject has higher weightage in paper one as compared to other subjects.
  • Syllabus is limited and almost static.
  • Benefit-Cost ratio is on the higher side as there are only two subjects in Section B of paper one as compared to four in Section-A.
  • Weightage of FM in past 3 year papers are :
    • 2022 – 160 Marks
    • 2021 – 135 Marks
    • 2020 – 150 Marks

Thus it becomes essential to have a proper preparation strategy.

Syllabus for Financial Management for Commerce Optional

Download the syllabus from the UPSC notification of last year, take a printout of the same and go through it regularly. It gives you a sense of confidence when you realize that in the dynamics of UPSC preparation where there are no boundations to your GS syllabus; at least you have an optional subject that does have some specified limits to thrive on. Syllabus of FM –

Chapter Description
Finance Function Nature, Scope and Objectives of Financial Management: Risk and Return relationship.
Tools of Financial Analysis Ratio Analysis, Funds-Flow and Cash-Flow Statement.
Capital Budgeting Decisions Process, Procedures and Appraisal Methods.

Risk and Uncertainty Analysis and Methods.

Cost of Capital Concept, Computation of Specific Costs and Weighted Average Cost of Capital. CAPM as a Tool for Determining Cost of Equity Capital.
Financing Decisions Theories of Capital Structure—Net Income (NI) Approach. Net Operating Income (NOI) Approach, MM Approach and Traditional Approach. Designing of Capital structure: Types of Leverages (Operating, Financial and Combined), EBIT-EPS Analysis, and other Factors.
Dividend Decisions and Valuation of Firm Walter’s Model, MM Thesis, Gordan’s Model, and Lintner’s Model.

Factors Affecting Dividend Policy.

Working Capital Management Planning of Working Capital. Determinants of Working Capital. Components of Working Capital—Cash, Inventory and Receivables.
Corporate Restructuring With a focus on Mergers and Acquisitions (Financial aspect only).
  • Top 3 chapters in terms of weightage-
    • Cost of Capital
    • Working Capital Management
    • Capital Budgeting Decisions

Booklist for Financial Management for Commerce Optional

  • Any coaching material
  • Latest ICAI Study Material
  • CA-IPCC notes (If you are a CA or in case you had prepared for IPCC in past)
  • Can refer to one of the reference books only if find yourself weak in this subject – Dr RP Rustagi, FM by Padhuka, PK Jain and MY Khan for FM or DK Singhal.

Theory notes for Financial Management for Commerce Optional

  • Make your theory notes from the above-mentioned books. It shall not be too bulky but also be comprehensive enough to cover the syllabus.

Example of Theory Question-

  • Easy Question – Explain the objective of maximizing the wealth of shareholders. (10 m., 2022)
  • Difficult Question – Discuss the following ways of incorporating risk in the investment decision-making process: The Risk-Adjusted Discount Method and The Certainty Equivalent Method. (10 m., 2018)

Practical questions for Financial Management for Commerce Optional

  • If you have gone through the last 3 years’ questions on Financial Management, questions come directly from ICAI study material with little modifications. Do solve all the illustrations and practical problems of IPCC study material of FM.
  • Generally the questions asked in numerical are easy. You need a basic understanding of the topic and a moderate level of practice.
  • However, sometimes question asked are hard (like in 2022). These numerical needs extensive practice and conceptual clarity.

Past Year Papers for Financial Management for Commerce Optional

  • Solve questions from the past 10 years as UPSC papers have the repetition of questions from previous year papers.


  • Join a test series and regularly write the test in the given schedule.
  • Before going to the exam hall, you should have written 5-6 papers of Paper one.
  • Along with this, do the writing practice of the questions when you study them as practical questions of this year’s (2022) commerce paper needed extensive practice to solve them in time.

How much time a fresher should spend on first-time coverage of the FM syllabus

  • If you are providing a full-time day for FM, then it can vary from 10-15 days depending on the individual.
  • If you are preparing it with other subjects and providing 6 hours a day, then it takes 20-25 days.
  • The first-time coverage includes practice, reading and making initial notes.

Exam day notes or Revision notes

  • Theory- have a maximum of 10 pages of notes covering major topics for last-minute revision.
  • Practical- Practicing the questions at the last minute becomes hard. What I used to do is-
    • Make a formula book of 5-6 pages.
    • Explanation book for practical questions. This is prepared at the time when you first time practices the question. Mention the page number and question number. Write the special points of the question to be remembered in a detailed form such that you don’t need to see the question again and the image of the question comes to your mind directly when reading it. Trust me it helps a lot at the last minute.
    • Mark some comprehensive questions of each chapter to be solved on the last day.

For Non-CA Student

  • Initially, you may find it difficult. Do not compare yourself with the CA friends around you. The examination does not demand expertise in the subject.
  • Revision, practice and notes are the keys. You can perform better by increasing the number of revisions of the subject. Do practice the questions of past years and study material of ICAI and make good personal notes for revision.

Discipline, dedication and perseverance are the other things that are needed along with the above strategy.

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