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CFA Flashcards

1
Q

Non-material information

A

Can be used to write reports but should not be shared with accounts for which the husband is a beneficial owner

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2
Q

Make distinction between

A

Required and recommended

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3
Q

Can you contact your previous clients?

A

If you took a copy of their information then no but if you use public records or your own recollection then yes

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4
Q

Should you use the information from another analyst?

A

No need to do your own research

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5
Q

Can you disclose client’s financial details?

A

You cannot but you can with their permission disclose that they are your clients

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6
Q

What is the policy for oversubscribed IPOs

A

Should not participate

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7
Q

What is the difference between current capital and financial account?

A

Current = Capital + Financial
Current flows of good and services into and out of the country (I/S)
Capital - Capital transfers, sales and purchases of non-produced, non-financial assets (B/S)
Financial Account - Government-owned assets abroad, foreign-owned assets

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8
Q

How to calculate depreciation of price currency

A

You need to divide the exchange rates by one and then calculate the change

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9
Q

when do Finance leases have equal values

A

At the beginning and end of their lives

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10
Q

Pension expense for a defined benefit plan

A

the components of the change in net pension asset or liability that are recognized as pension expense include service cost, past service costs, and interest expense or income on the beginning value of the net pension liability or asset.

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11
Q

When testing the correlation between two variables what is the test statistic

A

(rsqrt(n-2))/sqrt(1-r^2) with n-2 degrees of freedom

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12
Q

Where do securities held to maturity kept

A

Neither on the income statement or other comprehensive income

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13
Q

Relationship between S, I G and T X and M

A

Investment = Savings - (Government Spending - Taxes) - (Exports - Imports)

I = S - (G-T) - (X - M)

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14
Q

Std dev of sample mean

A

Sqrt(variance)/Sqrt(sample size)

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15
Q

How to tell if expansionary or contractionary policy

A

Compare neutral interest rates (real GDP Growth + target inflation rate) to policy rates. If the policy rate is less than the neutral interest rate then contractionary

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16
Q

What is included in footnotes

A

Accounting methods, legal actions, acqusitions and disposals, debt repayment, assumptions, commitments

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17
Q

Interest incurred for developing an asset

A

Is capitalized and never included as an interest expense

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18
Q

LIFO and FIFO

A

LIFO Inventory + LIFO Reserver = FIFO inventory
LIFO cost of sales - change in LIFO reserve = FIFO cost of sales
LIFO retained earnings + LIFO reserve (1-t)
LIFO cash - LIFO reserve x tax rate = FIFO CASH

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19
Q

What is interest coverage?

A

EBIT/Interest Payments

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20
Q

What is total asset turnover?

A

Sales/ATC

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21
Q

What is inventory turnover

A

COGS/Average inventory

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22
Q

What is a disclaimer of opinion?

A

When the auditor is unable to express an opinion about the financial statements.

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23
Q

What makes a financial statement useful and what are four enhancing characteristics?

A

Relevance and faithful representation are the two fundamental qualitative characteristics that make financial information useful. The four enhancing characteristics are comparability, timeliness, verifiability, and understandability.

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24
Q

test statistic to see if it is above 0

A

test statistic is average/(stddev/sqrt(n))

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25
Q

Free cash flow to equity

A

operating cash flow − fixed capital investment + net borrowing.

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26
Q

What is ROE (3 part)

A

(net income/sales) (sales/assets) (assets/equity) or net profit margin x asset turnover x equity multiplier

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27
Q

What is ROE (5 part)

A

(net income/EBT) x (EBT/EBIT) x (EBIT/Revenue) x (Revenue/avg total assets) x (Avg total assets/avg. equity)

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28
Q

Under IFRS, Interest paid and dividends received can be classified as

A

Interest paid - CFO or CFF
Dividends received - CFO or CFI

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29
Q

Fixed asset turnover

A

Sales / Average fixed costs

30
Q

What is Comprehensive income?

A

NI + Unrealized gain from available-for-sale securities = Comprehensive income

31
Q

DOL, DFL, DTL

A

DOL - how percent change in units sold affects operating income
DFL - How changes in operating income impact the NI EBIT

32
Q

adjusted beta

A

2/3(unadjusted beta) + 1/3

33
Q

Operating breakeven quantity

A

Fixed operating costs / (price - variable cost per unit)

34
Q

Example of price discrimination

A

Off-peak pricing

35
Q

Positive M2

A

Steeper than the CML so new CAL

36
Q

Disadvantage of NPV

A

Does not consider the size of a project

37
Q

Business Risk

A

Sales and operating risk

38
Q

When you look at duration estimates remember that

A

Duration is a linear approximation so it is going to be too low for all

39
Q

Synthetic short position

A

Long put position, a short t-bill position, and a short call position

40
Q

Return on margin purchase

A

(New price - original price - interest)/margin posted

41
Q

Macaulay duration

A

It is when you will recieve all the price of the bond back

42
Q

P/E ratio and it relationship to price of stock

A

Dividend payout / (ke-g) or D1/E/ (ke-g) P0 = P/E x EPS

43
Q

Difference between limit and stop orders

A

Limits - will be executed immediately and then stop order becomes market order

44
Q

List of firm stages

A

Embryonic, growth, shakeout, mature, decline

45
Q

What are some examples of Interest rate swaps?

A

Fair value hedge or a cash flow hedge

46
Q

order driven market vs quote driven market

A

Order - Liquidity is provided by other traders in an order driven market where buy and sell orders are matched according to order matching rules and pricing rules
Quote - investors deal with traders directly
Brokers - brokers find counterparties

47
Q

when given duration and convexity use this formula

A
  • duration (change in y) + 1/2 convexity (change in y)^2
47
Q

Sponsored depository receipts

A

The investor has the right to vote on the shares held by the depository institution in the home country.

48
Q

Global depository recepits

A

Global depository receipts are not traded in U.S. markets

49
Q

order of debt securities

A

Secured debt then unsecured debt. Ranked within as senior to junior, first mortgage to second mortgage, senior, subordinate, and junior

50
Q

Short Term funding for bank

A

CDs, Retail deposits, borrow excess reserves, loans from other banks, Repos

51
Q

Price of interest rate swaps

A

its par value

52
Q

How to do multistage growth

A

Take up until the first year you incorporate the steady growth then divide by ke-g. Once done then discount all back by required rate.

53
Q

Risk Premium

A

(1+RFR)(1+IP)(1+RP)-1

54
Q

Sample variance

A

sum(xi-x(average))^2/n-1

55
Q

Standard Error Calculation

A

stand dev/sqrt(n)

56
Q

Equation of Exchange

A

MV = PY

57
Q

Real exchange rate

A

Nominal (price/base) * (base currency CPI/price currency CPI)

58
Q

Formal dollarization

A

Country adopts a foreign currency

59
Q

Return on assets

A

EBIT/Average Total Capital

60
Q

Diluted EPS

A

Net income - pfd dividends + convertible preferred dividends + convertible debt interest (1-t) / Wtd avg shares + shares from conversion of conv pfd shares + shares from conversion conv debt + shares issuable from stock options

61
Q

Unlever the beta

A

Beta unleverage = B (1/(1+(1-t)(D/E)))
Beta releveraged B (1+(1-t)(D/E))

62
Q

CML vs. SML

A

CML - tracks std dev
SML - tracks BETA

63
Q

Plotting above and below the SML

A

Above - underpriced therefore buy below - overpriced therefore short

64
Q

Difference between Operationally efficient and informationally efficient

A

Operational - lowest transaction cost
Informational - adjusts quickly to new information

65
Q

P/B

A

Price per share/Book value per share

66
Q

P/S

A

Price per share/ sales per share

67
Q

difference between G-spread, I-spread, Z- spread and Option spread

A

G-spread - difference between government yield
I - spread - difference above swap rate
Z-spread - Accounts for shape of yield curve
Options-adjusted - adjusts for effects of options

68
Q

Bon investors concerns with short horizons vs. long horizons

A

short horizons - market price risk
Long horizons - reinvestment risk

69
Q

Effective duration

A

V_ - V+/2V0curve

70
Q

Value of a forward contract

A

S + PV (costs) - PV (benefits) - F0(T)(1+RF)^-(T-t)

71
Q

Stages of venture capital

A
  1. Formative stage (angel investing, seed stage, early stage)
  2. Later stage (expand production, increase sales)
  3. Mezzanine Stage - prepare for IPO

CFP (2 decks)

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