CHWESER’S QuickSheet CriticaL CONCEPTS FOR THE 2020 CFA® Exam 1 CFA Init he CFA Designation and the CFA Progra Global Investment Performance Standards (ars) Coplcne atm ese mame offre] has pander cnt Sedan (GIPS)~ meat be Sande GIP): Campane ma bappid . ic en eons 4 ocean pecans aes ‘porting ral ext, private equity td wep Feeseparsely manage coun QUANTITATIVE METHODS “Time Vale of Maney Basics Fane ralae (EV) amount which evestment Ws. Anais eis of ual cath ows that occur at ‘remy spaced intra overtime. "= Ondiuary amen ca Bow a end fie pera. + Arena ab fw peted. envi wich inne Une PV,» PMTIGscount re). Required Rate of Rerara ‘Componens= 1 Real ik fice rae (RER)- 2 Expected inflaon te premium (P). 3. Rok premium E(R) = (1+ RFR XU IPA0-+ RE) —1 Apprximaon ema fx soins rai te EIR)=RFR + TP+ RP ced ‘ie mene of ol caren vbsin ‘ml popeacoa died by # of oars Cet oerdchen cbsteo oa ‘sur nr mle pero mre ns eee Renee R/S of erin (CN) expres hoe much depenion ex rive fo mean of distribution; allows for diet comparon of dipesion across ‘fle dacs ete CV is aloud by viding [andar devon of a dstnbution by the mean ot ‘pected ale ofthe dbucon: 7g ‘Roy's Safery-First Ratio ee Expected Retun/Standand Dovistion spec reer F(X) = Pa) E(X) = PCs) Plaa)sa hoot Pla ae Probe nine 27(X)= SD Plas EP = Playin, E(X)P + P(x ~EOX) tot Pleat “EON! Sandel devon: ake square 10% oF vince Corcation and Covance Corel: covatnce died by produc ofthe wo mandad dvi cov(R.-R) e(R,)o(R) who?(Ry)+ wie" (Re) +2 qwe0(Ra)o(Rs)e(RaRa) arene Setar rece eoniees aoe Be ewes pase, Se eae aaa enna Ss are SSS ea petit Sa oan eoreeea ‘equal wo o°/n as the sample size becomes large. =e a aes eer raees ‘known population valance: 2 = eee Confidence Intervals (Confidence eral: gives range of ales the mean sale willbe beeen, wih a given probably ay ‘90% or 95%). With known vaianc, formal for + confidence inten Pe 2 LAS For 90% confidence intervals (signibcance lee 10%, 5% in cach el) 960 for 95% confidence ners (Gigpicance level 58%, 2.5% in each il) 2,92 2575 for 99% confidence interals ‘Gigaicance eve 1%, 0.5% in each i) seo [Nall and Alternative Hypotheses Nall Iypethss (Hypothesis that contains the ‘equa sia 2, <5) the hypothesis cha is acy tented the bass for ation ofthe est satis Arma (EL) concluded if dees ficient evidence reject the aul bypothesis Difference Between One- and Two- Tailed Tests One-tsiled ts tows whether ale pre than oe lesethan 3 given number+ Trond tse Ht = Overs Hate 0. ‘ype Land Type Il Esroes + Fe Tar jection of nll hypochess when eit sre me, + Tipe tf err Gce wo jc ll hypothesis when hese be. ‘Types of Hypothesis Tess ne raat oe esa the popeation ‘peur location of rein diene i eas. puted compare) Use chee arc foe wo single pepubion varunce he Fei for ess comparing two popuaion ‘Use Paani with a2 for ws ofcoraion. ECONOMICS 1 postive he gods maemal good Wegative the ood ican infos good Co Pie — Seb ped Ope short rif al revenue seater than tea vable con bt es than eel one (Sha deen ore ra if eel tren os thas toa variable com. Marker Structures Por competion: Many fms with no ping power very low rn Briers 9 rei wc ih arr en dc may fr differentiated Taney Sage om eh pct eng owe high Baris entry adversing wed © ‘Compete with substiute products Iva marke seractates, roi maximized at the oupaxquaniy for which marginal revente = marginal oe. Gross Domestic Product Real GDP = consumprion spending + invement + overament pending net por ‘Savings, Investment, Fiscal Balance, nd Trade Balance Fal badge deficit (G ~T1) = exces of saving vet Aomesic ivesment (Sf) wade balance (XN) Erqation of Exchange MV= PY where M = ral money supp V = ‘loci of money in transactions P= price keh, snd Y= real GDP Bosiness Gre Phases Expansion: peak eoneaction: ough. Economic Indicators Leading: Tarsng eins occu send of peaks ad troughs (ack pes inal unemployment cams, ‘manufacturing new ones) Concent: Tsing piss coincide with pais snd woughs nonfsem payrolls penoeal inom ‘masulacaring ale) Leggy Trang pits ll peaks and rough (average durntion of unemployment inensaey sale ei, pime se) Factors Affecting LR Aggregate Supply ‘Sie of abr force: uma cape: ppl of tatu sources: ck of physcal cape of Sacer uncrployed worker do moc have the blir mech new crea obs (Gra economy ping ales than capacity ing comracin pe of busines oneactionary when the policy rte reer han {he never terse te (Focal oly xperionay when a edges decir increasing o arp deresuing and ontracionary when a bodge det s deresing broad foreign-owned satin the county Regional Trading Agreements Fre ade area Removes buries goods and sevice trade among members. carrey Forcign Exchange Rates For the exam, Fk ates ae expel spice ere ae currency dined 36 the number of units ofthe pce ccrency fr each uni Fhe base curency ‘ast of curenciee a Tag sone Wider sagpia than Bed cg, Goring po Pegged eange tt dgued esodially (Corton hands Wilh of agin increas oct ees eer Discontinued Operations Tote sand fr 3 dcotinuclopertin. Iheinae anes opin inating aang stniiomust be pscalyopersonaly dic from mat offrm. Incomeloner re repo ef tet afernexincome rom conning operons Compute Cash Flows From Operations (CFO) Dine edd mar with ch icon (ca “ae ofl chirp ch eae ‘ec of ond slat perigee coh inert pene ca ome ‘adic meta a with income, bring Ihe ans and adding bac loc eng fom ot iaremen sh Rows aiding bck ll smc carpe a adig and oberg act {elation ht ral om operat Free Cash Flow Frc fiw (FCF) ess ch able ot ‘Eeceroory pores ries operning ch low es et capital expeneke guy ai nd wed deer (Citic Raion Corot fina cement eps + Commea sine blence ser expres al balance sheet account ar pecennage of wu ae. + Commons income sasemen expe al ieome satemens ems 2 perceneage fk + Comes sine cash Now statement epee cack ee eee ws porcercge of wel cub inflows (carious) o 22 prcentge of et revense. Laguaiy res indicate companys abi 0 pay its saree Ebi Operengpformance rei inca how wll gr oper the bine ee spamaig aaa aes a anneal ses ae as eel aie erie octet xs mene dg of pp = — 2S exhcamenioe ae He Pe eee Tue, fd ac, od working ap amor Accounting Ie psd of ing prs nd cable or ncesing Inventory quae FO rnc Higher COGS wer ges profi Lower tvenay tlie Basic and Diluted EPS asc EPS colton doe ot conse sof ny live series in emmpuson of EPS 5 dee MES = i ay an ol cmon te comeag eps _ 2 neon afr eommen hres | ‘conan ses cong FIFO rai: Lower COGS. Higher pros pri Higher ventory bainces [I pais ancl oes es marking to Bt vale ae ‘ecogaied income) U.S. GAAP ealaron i oe permed. Deere Ta + Creare when table income (om fa urn) = fered ta ais creed when taxable ‘income < pets income. Treat DTL 2 iy if socenpced to mvenes > press income. Mast recogine nalation ‘lesen mote ty than not hat DTA will focbereiaed. Loog:Term Lisbilnes + Prema bon: op te > ath ft + ere xp spl ook vale athe bepining ofthe year eae by che macker rea west th ime the Bonds wee fue, Leases {FRS: Les reports set and ability on balance shee Principal portion of payment reces eae as ance or operating US. GAAP: Lese repos 3s faance leas (sme seat IFRS a oping len (on bane‘Weighed Average Cant of Capital WAC =e Ih OAOI+ (epg) rk) Coto Peed Stock ae Cano Egy Capi Rapes Cont of Ey Using CAPM b= BER 3 (Ru —RFR) Copia Bedsting cr, ee eeranae prin {RR acount that makes NPV eel wo Pare Ply Method Project Bees Adc poe bes mbes me }4{0-02] Measures of Leverage Ta ng percent cg netincme from 2 prem pecan change! Opa ntage pm ge EIT Bom, 4a pwen percent change im ler “rae lvenige:prcen change inne income from given pecear change ia EBIT. breakeven quay of aes = fied Ac iancing cons ike vaiable ee per sr perating beakeven quan of tle = + Timehorizon. + Tarcoecerne Legal and epubory Bc. + Unique crcemsances ning Preferences with che Sex of Cocnbinng Opi: Markoni ficien footers test of porte ‘thar hve highest rena fr give ee of ak uy) ‘Scuity Mathes Line (SM) avestors shook only be compensated fo fk ‘elaine © marke. Uroparmati rks drei say iwetoe we compensated fot ematicrk “The uiion ofthe SML isthe CAPM, which 2 venu/ysicmac ck equim rclaonship. wea dk = ytemade « unqrnematc rk em opal ae tine (en Foes a ee Sey Mos Lie ome ea Senco) “The SML and Equine Benaing mpd socks (Comider three woes (A.B, and SM. ‘Emad ck sens chal plot oa SM. + Arun plot ve he ie nrc + Arr plot under the ines werd ER) Anabas Rewer pater head esol invee HES, deablge op or borom. (Conan pres ranges eargo. eames, ag. DPrcebeed nba: moving megs Baling ‘and, momeonum ln (ate of change, RST, seochatic MACD). Someta pt alae maria debe sw nee ln Peotone THIN pe dee smu fond ah postion. ew gy ce, sccondary oeings. SECURITIES MARKETS EAA s a 1) ae : *+ Informational eicieny (pices rapidly adjust to ‘ew information). Margin Purchases For margin arsactions + Leverage tor = Ifmarginpecenage. 1 Levered urn = HPR x leverage for, Margin Cal PriceComparing toe Pies Saas teeeT eich ines er oe ec aknie er steak as a aoe Steen os eee Exe inaction how townie: 2, mathet conden nit onde eacaoe: when 0 OECWE: Eg SP codes dey odes fille kil odes. Charing race how cee sel see forse onder Specify shoe sale o ale of owned sei. Market Serocoes (Que dren marten: nveoet rae with desler Crlerarore mares bey id wllen mabe by res Breed market: bokes Gd counterparts. Forme of EMH CE - ow peret Ns per eed maces eee an See Een ithe veces wr Hal ees epson, aaa ———a aa NVESTMEN poe oe nate EN ilo Tandy Lie Ge Senge ager el pce psd Reg) abe ge Nigh pe Del pep pc eee paler tig ee eal coker en thee erent canpcina ceoty ai reece eee pot pice. Buckwerdation Fatars pie «pot Pe ‘Sours of imretnene rms 5 Gollsea eld rsa 0 bls poe 3¢ margin. Pree rear: dc to change in poe pie. al yield postive for backowartaton, negative for conta. fares price ~ spor price + + aorage core ~Toovenience yd Infastractore Lng ted ase: for public use including transportation tli. communicaons soi Garp neato be