Escolar Documentos
Profissional Documentos
Cultura Documentos
Selfdisclosure
An inquiry can be prompted Written complaints
by several circumstances
Evidence of misconduct
a.
Report by a CFA exam proctor
1. Code Of Ethics And Standards Of Professional Conduct - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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Please contact johnway168@yahoo.com for more details. Understand and comply with
applicable laws and regulations
Code and Standards vs. Local law Follow stricter law and regulation
Stay informed
Review procedures
Members and Maintain current files
candidates
When in doubt, seek advice of
compliance personnel or legal counsel
When dissociating from violations, --> Document
Recommended any violations and urge firms to stop them
procedures for
compliance (RPC) Develop and/or adopt a code of ethics
Make available to employees info that
Firms highlights applicable laws and regulations
Establish written procedures for reporting suspected
violation of laws, regulations or company policies
Application
2.1 Standard I PROFESSIONALISM - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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its significant CFA stuff.
impact to the price
of security if it is disclosed
Please contact johnway168@yahoo.com for more details. Material information
Reasonable investors would like
Definition of "Material to know for making decision
nonpublic information"
The reliability of the information
2.2 Standard II INTEGRITY OF CAPITAL MARKETS - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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audio MP3, secret sauce, sample exam and mock exams, and we also offer Wiley, Elan, FinQuiz CFA stuff. The financial markets and
investment management industry
Firms previously claiming compliance with an Investment Performance If not meet all the requirements, cannot state:"...in compliance with GIPS except for..."
Council-endorsed Country Version of GIPS are granted reciprocity to Statements referring to the calculation methodology used in a composite
claim compliance with GIPS for historical periods prior to 1 Jan. 2006 presentation as being "in accordance [or compliance] with the Global
Claims of compliance Investment Performance Standards" are prohibited .
Statements referring to the performance of a single, existing client as being "calculated in
accordance with the Global Investment Performance Standards" are prohibited except when a
GIPS complaint firm reports the performance of an individual account to the existing client
b. Interest rate
receiving less than fair value if an
5. TIME VALUE liquidity risk investment must be sold for cash quickly
Future value Several risks of securities
OF MONEY
Longer-term bonds have more risk
Present value maturity risk than shorter-term bonds
a series of equal cash flows that occurs -->The required rate of return on a security = real risk-free rate + expected inflation rate
at evenly spaced intervals over time. + default risk premium + liquidity premium + maturity risk premium
occur at the en d of each time period. Ordinary Annuity
represents the annual rate of return actually being earned after
FV of Annuity Due = FV of Ordinary adjustments have been made for different compounding periods
Annuity x (1+ I/Y) Annuity e. CF calculations
Where:
PV of Annuity Due = PV of Ordinary occur at the beg inning of each time period. Annuity Due Periodic rate = stated annual rate/m
Annuity x (1+ I/Y) m = the number of compounding periods per year
c,d. EAR
divide the stated annual interest rate by the number of compounding
periods per year, m, and multiply the number of years by the number
PV of a Perpetuity of compounding periods per year
Non-annual time value of
money problems
Discount each individual cash flows
Use CF function in Calculator Uneven CF
5. TIME VALUE OF MONEY - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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NPV
Accept projec ts with a positive NPV
1. Based on face value, not price Different project size: the smaller projects may have
Calculate,
2. Use 360-day higher IRR but their contribution to the firm value
Not much meaningful Interpret, Conflict with may be smaller compared to the larger projects
3. Use simple interest, ignore Decision rule NPV due to
reinvestment of interest Differen timing of cash flows
6. DISCOUNTED CASH FLOW APPLICATIONS - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
We offer 2015 schweser notes, practice exams, qbank, curriculum, video (video workbooks),
audio MP3, secret sauce, sample exam and mock exams, and we also offer Wiley, Elan, FinQuiz CFA stuff. Statistics is used to refer to
data and to the methods we
use to analyze date
Sample statistics
A sample is defined as a subset of mean (measures of central tendency)
Population vs. Sample the populations of interest which addresses return
a. The most frequently concerned Var (measures of variation around
Excess kurtosis = sample kurtosis - 3 Calculate center) which addresses risk
Leptokurtic: more peaked, fatter tails l. Kurtosis Classify or count observations with no
(excess kurtosis > 0) --> more risk Nominal scales particular or ranking
mean=median=mode
A parameter is a measure used to
the frequency of experiencing
describe a characteristic of a population
losses and gains are the same
A sample statistic is used to
Parameter vs. Sample statistic
measure a characteristic of a sample
bar chart
Histogram
CV (Coefficient of Variation) d.
line chart
i. Relative dispersion Frequency polygon
94%: +/-4k
Weighted mean
Mean (portfolio return)
Easy to compute
affected by extreme value (compound growth)
Range = Max - Min Geometric mean
no info on how data is distributed
e. Measures of (return data set)
better than range
central tendency Use of arithmetic or geometric mean
less sophisticated than Var and Sd when determining investment returns
Harmonic mean
g. Dispersion
Population (cost of shares)
(measure of risk)
Variance & Standard deviation Harmonic < geometric < arithmetic
No mode
Unimodal, bimodal, trimodal
Semivariance and --> the only measure can be
semideviation used with nominal scale
Mode
Model interval -->
for continuous distribution
into fifths
f. Quantile Quintile
into tenths
Decile
Ly =(n+1) xy/100
Percentile (100)
7. Statistical Concepts and Market Rerurns - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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F.Stm
Element Additional disclosures required by regulatory
Any commentary by management
FR Financial position
Useful to a wide range of users in
Role of FR Firm's performance making economic decisions
Roles of FR & FSA
Changes in financial position
Revenues
Expenses
Income Statement
Gains and Losses
Assets
Liabilities
Role of key FS Balance Sheet (A=L+OE)
Owners' equity
CFO
CFI
CF statement
CFF
Statement of changes in Owners' equity
not audited
operating income or sales by region
or business segments
Supplementary schedules reserves for an oil and gas company
info about hedging activities and
financial instruments
Importance of
assessment of financial performance and condition of a
company from the perspective of its management
22. FSA Results from operations, with trends
Introduction in sales and expenses
Publicly held companies in US Capital resources and liquidity, with trends in CF
General business overview
discuss accounting policies that require
significant judgements by management
discuss significant effects of trends, events, uncertainties
MD&A
liquidity and capital resource issues, transactions
or events with liquidity implications
Discontinued operations, extraordinary
items, unusual or infrequent events
Extensive disclosures in interim financial statements
disclosure of a segment's need for CF
or its contribution to revenues or profit
22. FSA Introduction - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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Operating activity: activities that are part of the day-to-day business function of an entity
Classification Investing activity: activities associated with acquisition & disposal of long-term asset
Financing activity: activities related to obtaining or repaying capital from shareholders or creditors
Assets
Liabilities
Elements Equity
Revenue
FS elements
& accounts Expense
Account & financial Chart of accounts : set forth the actual accounts used in a company's accounting system
Accounts
statement Contra account: offset or deducted from other accounts
Liabilities
Assets Contributed capital
Accounting equation Owners' equity
Retained earning
23. Financial reporting Expanding: A = L + Contributed capital + BGN Retained earnings + Rev - Exp - Dividend
mechanics
Unearned (Deffered) revenue
Cash movement prior to Acct. recognition
Prepaid expense
Accruals & Valuation
Accruals Unbilled (Accrued) revenue (when billing, Un.Rev decrease & Receivables increase)
adjustment Cash movement after Acct. recognition
Accrued expense
Valuation adjustment: made to company's A or L so that account records current market value (not Historical cost)
Using fin. statement Analyst uses FS to judge the fin. health of the company
in security analysis Analyst can use his understanding to detect misrepresentation
23. Financial reporting mechanics - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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IOSCO (international): not a regulatory, but its members regulate significant portion
Standard setting &
Regulatory bodies FSA (in UK)
Regulatory authorities 1. Protect investors
(enforcing standards) SEC (in USA) 2. Ensure: market is fair, efficient, transparent
3. Reduce systematic risk
Understandability
Verifiability
Relevance
Enhancing Comparability (consistent among firms and time periods)
Qualitative Faithful presentation
characteristics (complete, neutral, free from error) Timeliness
of Financial position: A, L, E
Measurements
of performance: Income, Expense
IFRS framework
Accrual basis
Assumptions
Going concern
Fair presentation
24. Financial Going concern basis
Reporting Standards Accrual basis
General requirements Aggregation
for FS under IFRS
No offsetting
Principles for PREPARING
Consistency
Materiality
Comparative information
Frequency of reporting
Transparency
Characteristics of a coherent Comprehensiveness
financial reporting framework Consistency
Valuation
IFRS
Principles-based
Effective FR relies on broad framework
24. Financial Reporting Standards - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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Def: represent Financial performance
Expense (ordinary)
Expenses
Loss (Invest, Finance)
Accrual accounting
1. seller can collect the price
IASB 2. evidence of transfer ownership
3. cost can be reliably measured
General principles Revenue recognition 1. evidence of arrangement btw buyer and seller
2. product delivered or service rendered
SEC
3. price is determined or determinable
4. seller reasonably sure of collecting money
Revenue includes:
1. Sale price: at the date of sales
Revenue recognition IFRS 2. Interest income: recognise over time
2. Installment sales
Installment method: recognise profit according to cash receipt in relation to selling price
US GAAP Cost recovery: no profit 'til cash receipt > cost
Sale basis:
Inventories
Period costs
25. Understanding Expense recognition (not directly related to Rev) Admin cost
The Income Statement
Doubtful accounts: estimated cost (expense, not directly reduce Rev)
Warranties:
1. When sell: estimated cost
Issue 2. When repair: actual cost
SLM
Depreciation & amortisation
Accelerated depreciation (residual value is NOT used to calculate)
IFRS: prohibit
2. Extraordinary items Unusual in nature + infrequent in frequency
US GAAP
FR treatment & analysis of Non-recurring Report separately on IS
non-operating items
3. Unusual or infrequent items IFRS + US GAAP: report above IN from continuing operations
Operating components
Distinguish
Nonoperating components
Simple
Capital structure Complex
Formula:
Basic EPS
Common shares
Preferred shares/convertible
Complex capital structure
Convertible bond
Stock option
Diluted EPS
Diluted EPS > Basic EPS => Anti-dilutive: don't calculate Diluted EPS
Treasury stock method
Method
If-converted method (preferred convertible; convertible bond)
25. Understanding The Income Statement - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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Corporations
Sovereign national government
Dual-currency bond
Payment currency Currency option bond
Factors affecting Bullet structure Ballon pmt: the final installment of a loan that is larger than regular installment
issuance & trading
Sinking fund provisison
of F.I Amortizing
Accelerated sinking fund provision
Equity-linked notes
Contingency provision
Put option
Benefit bondholder Convertible bond + Contingent Convertible Bond
Warrants
52. F.I securities. Defining elements - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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Credit quality
Original maturities
Global markets Coupon structure
classification Currency denomination
Geography
Indexing
Tax status
Bank debt
Difficulties:
1. Deterioration in a company's actual
When mature: "Rolled over" 2. Significant systemic financial distress
Types of debt issued
Commercial paper
by corporation US: %discount from FV
Quoted price EU: add-on yield
Corporate bond
Medium-term Note (not necessarily medium-term) *
Customer deposits
Short-term funding
Certificates of deposit
alternatives available to
Interbank fund
banks
Central bank fund market
53. F.I markets. Issuance, Trading & Funding - CFA Mind Map Level 1 - 2014 - Copyright by BL KAte
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57. Overview of derivatives - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate
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Definition
FRA (Forward
rate agreement)
Equity/index
Bond
Interest (FRA) Types
Currency
Commodity
58. Forward contract - CFA Mind Map Level 1 - 2014 - Copyright by BL Kate