7city Learning - Cfa Level I Exam Companion: The 7city / Wiley Study Guide to Getting the Most Out of the Cfa Institute Curriculum

This edition first published 2013 by John Wiley & Sons Ltd

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Foreword by Pamela Peterson Drake, PhD, CFA

The CFA Level I exam is the first and broadest of the three exams in the CFA Program. The Level I exam is a challenge primarily because of the breadth of the material candidates preparing for this exam must have a basic foundation in accounting, economics, statistics, corporate finance, and investments. Every candidate comes with a different background and skill set, so the areas a candidate may need to emphasize may differ. But all candidates should be familiar with the readings in the 18 study sessions.

The Ethics topic, which you will see again on Levels II and III, is focused on the Code of Ethics and the Standards of Professional Conduct, but dont forget to look at the CFA Institute Professional Conduct Program, which delineates the process of enforcement with the possible revocation of membership, candidacy, or, in the extreme, the use of the CFA designation. Also, dont overlook the Global Investment Performance Standards (GIPS), which focus on the ethics of reporting investment results. Understand both the why and the how of reporting results compliant with GIPS.

The Quantitative Methods topic covers financial mathematics, probability, and statistics. While the emphasis of the learning outcomes is on calculations, dont just focus on the mechanical; you will remember and be better prepared to apply the calculations if you understand the math or statistics behind the equations. Youll notice that Technical Analysis is tacked on to Quantitative Methods; you neednt become an expert in Elliott Wave Theory, but you need to know that some practitioners use technical analysis and that there are common approaches to analysis of patterns. Key, however, is recognizing the difference between technical analysis and fundamental analysis.

The coverage of macro- and micro-economics is similar to what you would find in the introductory courses in each, but remember that the focus is on how the analyst will use this knowledge in the analysis of an industry or a company. Therefore, as you read this material, think about the implications for financial analysis. As with all the topics, you also need to think globally, and in the context of Economics this means understanding the benefits of international trade as well as knowing the basics of exchange rates.

The biggest topic in terms of the weight is Financial Reporting and Analysis, which encompasses what we more familiarly refer to as accounting. You need to be familiar with financial statements how they are constructed and how they are linked to one another and then focus on specific accounting. This specific accounting sets the stage for the quality of financial statements, which is the closing subject of this topic.

The Corporate Finance topic is broad and encompasses many readings that are a bit out of proportion for its weight in the exam. However, this is material that is covered in a typical principles of finance course, and some of this material overlaps material elsewhere in the curriculum (e.g. financial ratios). Remember that the focus is on financial analysis and think about how investment and financing decision-making by a company affects its value.

Portfolio Management is a topic whose importance grows as you progress through the three levels of exams. At Level I, this topic spans the basics of portfolio theory and asset pricing. But dont forget the wealth planning component, and be sure to consider clients needs with respect to investment objectives, constraints, and risk tolerance. Be sure to consider how this topic relates to the ethics coverage.

The Equity topic includes descriptive information on markets, as well as the theory and evidence regarding market efficiency. The topic also covers fundamental analysis, which begins with the economy, and extends to the industry, and then finally the company. Keep in mind that some of this material links back to financial reporting and analysis.