CFA Certification Exam Prep (Answered)
Over 1000 Questions and Correct
Answers With Rationale. 100% Verified.
Latest Fall 2024/2025.
6 components of the Code of
Ethics:
+Act with integrity, competence, diligence, respect and in an
ethical manner wit the public, clients, prospective clients,
employers, employees, colleagues, and all participants in global
markets
+Place integrity of profession and interest of clients above all else
+Use reasonable care and independent professional judgement
when conducting investment analysis, making investment
recommendations, taking investment action, and engaging in
professional activities
+Practice and encourage others to practice in a professional and
ethical manner that will reflect credit on themselves and the
profession
+Promote the integrity, and uphold the rules of, the capital markets
+Maintain and improve
7 Standards of Professional
Conduct:
+Professionalism
+Integrity of Capital Markets
+Duties to Clients
+Duties to Employers
+Investment Analysis, Recommendation
and Action
+Conflicts of Interest
+Responsibilities of a CFA
Member/Candidate
A change in accounting
estimates...
Is a change due to new
information and does not require
old statements to reflect it
,A change in accounting
principles...
Requires restatement of prior
financial statements
A Priori Probability
Comes from a formal reasoning
and inspection process; an
objective probability
Absolute Yield Spread
The difference between yields on two
bonds;
= Higher Bond Yield - Lower Bond
Yield;
Most commonly used;
Shortcoming is it may always remain
constant even as yield rise or fall
Accelerated Depreciation
Applies depreciation more at the
beginning of an assets life
Accelerated Sinking Fund
Allows the issuer the choice of
retiring more than the amount of
bonds specified in the sinking fund
requirement
Accounting Information Flow
1. Journal record every transaction by order of date
in the general journal
2. The general ledger sorts the entries in the
general journal by account
3. An initial trade balance is prepared at the end of
the period to show the balance of each account
and adjustments are then made
4. Financial statements are made from the
adjusted trial balances
Accounting Warning Signs
+Aggressive revenue recognition
+Different growth rates of operating cash flow and earnings
,+Abnormal sales growth as compared to the economy, industry or peers
+Abnormal inventory growth compared to sales growth
*Could be signs of obsolete products
+Boosting revenue with nonoperating income and nonrecurring gains
+Delaying expense recognition
+Abnormal use of operating leases by lessees
+Hiding expenses by classifying them as extraordinary or nonrecurring
+LIFO liquidations
+Abnormal gross margin and operating margin as compared to industry
peers
+Extending the useful lives of long-term assets
+Aggressive pension assumptions
+Year-end surprises
+Equity method investments and off-balance-sheet special purpose entities
+Other off-balance-sheet financing arrangements including debt guarantees
Accrual Accounts
+State the objective and context
+Gather data
+Process data
+Analyze and interpret data
+Report conclusions and
recommendations
+Update analysis
Acquisition Method of Accounting
for Business Combinations
When the purchase price is
allocated to the identifiable assets
and liabilities of the acquired firm
based on fair value and the rest is
recorded as goodwill
Action lag
Time it takes governments to vote
on and enact policy
Active crawling peg
When the adjustments are
periodic, announced and
implemented
Ad Hoc Auction Services
, Method where central government
auctions new securities when
market conditions are
advantageous
Addition of Probability
P(A or B) = P(A) + P(B) - P(AB)
Adjustments to Compare Firms'
Financial Statements
+Accounting of investment
securities
+Inventory cost methods
+Depreciation schedules
+Off-balance-sheet financing
+Treatment of goodwill and other
intangible assets
Administrative Steps to Capital
Budgeting
*Idea generation
*Analyzing project proposals
*Create firm-wide capital budget
*Monitoring decisions and
conducting a post-audit
Advantages of ETFs
Exchange-Traded Funds (funds which track indices)
+Efficient diversification
+Traded like a stock
+Better risk management by having options and
futures markets
+Investors know the exact composition of the fund
throughout the day
+Low expense ratios
+No worry about trading a a premium or discount
to NAV
+Dividends can be reinvested immediately
+Low capital gains tax liability
Advantages of NPV and IRR
NPV: A direct measure of the
expected increase in the value of a
firm
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