16 Oct 2015

How To Crack CFA Level 1 Exam

This webinar on ‘How to Crack CFA Level 1 Exam’ focuses on the following: CFA Level 1 Introduction Who should write it? How to prepare for it? The Refresher Course: Your Success Mantra Sample Class: FRA: Cash Flow Statement (R27) CFA Level 1 I ntroduction The CFA Level 1 Exam marks your entry into the CFA...
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This webinar on ‘How to Crack CFA Level 1 Exam’ focuses on the following:

  • CFA Level 1 Introduction
  • Who should write it?
  • How to prepare for it?
  • The Refresher Course: Your Success Mantra
  • Sample Class: FRA: Cash Flow Statement (R27)

CFA Level 1 I ntroduction

The CFA Level 1 Exam marks your entry into the CFA program . It covers areas like Ethics, Quants, FRA, Corporate Finance, Economics, Equity, Fixed Income, Derivatives, Alt. Assets, Portfolio Management and more. The weightage for each area is spread between 5-15% .

Picture1

The Level 1 exam has two papers – AM and PM , with MCQs having much lesser risk. There are 120 questions to be completed in 180 minutes. The exam has a nearly 35-40% pass rate . Since there is no hurdle score, you can maximize your chances of clearing the exam by applying common sense on what you know and on what you don’t. The image below shows the falling trend in pass rate, which could be attributed to a rising difficulty level in the exams.

Picture2

Who should write the exam?

CFA is the gold standard in shaping you career in the international investment industry. Here are some questions that you must ask yourself if you are in doubt about pursuing the CFA program:

  • Are you interested in the investment industry?
  • Are you in the final year of your college?
  • Do you want to get into banking/investment/ research/ investment banking profile?
  • Are you looking out for the best self-study course in finance?

How to prepare for the exam?

Here are some tips that you can follow in order to prepare well for the CFA level 1 exam:

  • A balanced preparation ranging from 50-400 hours is good enough
  • You can spread the prep time across 2 months
  • Try to take along a few topics and focus on the same
  • Do watch and listen to the video tutorials for better understanding
  • Back-to-back practice must be done to maximize the preparations

The Refresher Course: Your Success Mantra

You can crack the CFA Level 1 exam with consistent preparation guided through the Refresher Course, uniquely designed to take care of all your exam-related requirements. Here are the key features of the course:

  • 8 weekends, 50 hours of face-time with expert trainers from FinStudyClub powered by Wiley
  • Live Webinars on Crucial topics across all subjects: 80:20 rule
  • Accompanied with lots of practical examples
  • ‘Not-so-important’ topics also covered through online recorded tutorials: Comprehensive Coverage
  • Includes Wiley’s Test bank with more than 500 questions & Two Mock Exam

Sample Class: Cash Flow Statement

A Cash Flow Statement provides information about sources and uses of cash of the firm. It provides information to assess firm’s liquidity, solvency and financial flexibility.

Picture3

All cash flows are classified into the following categories:

  1. Cash flow from operating activities (CFO) : Net Income related cash transactions
  2. Cash flow from investing activities (CFI) : Cash transactions related to LT assets & investments
  3. Cash flow from financing activities (CFF) : Cash transactions affecting capital structure

Operating cash flow
+Investing cash flow
+ Financing cash flow
= Change in cash balance
+ Beginning cash balance
= Ending cash balance

Cash from Operating Activity (CFO)

CFO stands for cash flows from regular business / incidental transactions.

  • Inflows: Collection from customers, Interest and dividend income from investments, Proceeds from sale of trading securities, Tax refund
  • Outflows: Payment to suppliers, Payment for other expenses, Interest paid on loans / debentures, Purchase of trading securities, Taxes paid (in relation to any transaction)

Cash from Investing Activity (CFI)

CFI stands for cash flows related to acquisition of long term assets + non trade investments.

  • Inflows: Sale of PPE, Sale of investments other than trading securities, Receipt of installment of loan given by organization
  • Outflows: Purchase of PPE, Acquisition of investment other than trading securities, Loans made to others

Cash from Financing Activity (CFF)

CFF stands for cash flows related to capital structure of the organization

  • Inflows: Issuance of shares, Receipt of loan from financer, Issue of debentures
  • Outflows: Payment for debentures, Buy back of stocks, Loan repayment, Dividend paid to shareholders

Notes to Cash Flow Statement

Here are some important points to keep in mind while preparing the Cash Flow Statement:

  • CFO is calculated differently under direct and indirect methods but the result remains the same
  • Calculation of CFI and CFF is identical under both methods
  • Denote cash inflows (sources of cash) as positive numbers and cash outflows (uses of cash) as negative numbers
  • Changes in assets and changes in cash flows are inversely related
  • Changes in liabilities and changes in cash flows are directly related
  • Ignore depreciation under direct method
  • Notes payable is short term but since financial in nature – to be treated under CFF
  • Bonds payable is a long-term liability and is covered under CFF(ignored for CFO)

Questions asked during the webinar

Q1. Are there any specific videos to watch for CFA?

Yes, there is a wide variety of free videos on YouTube. The structure of the video has to be good and should cover crucial topics. You might also need hand-holding under an expert’s supervision to follow what is taught in the videos.

Q2. Is CFA Tougher than CA?

Both are two separate courses – CA is an accounting course while CFA is an investment course. Both have some commonalities but are for different audiences.

Q3. Are there any specific tutorials on how to get a hang of financial calculator?

Scientific calculators can be complicated and a burden sometimes; there will be a specific video covering the same as part of our training course.

Q4. In CFA or actuarial science, what is more difficult? What are the job prospects?

Actuarial science is applied extensively insurance and different statistical applications, while CFA is part of finance vertical, inclining more towards commerce. Actuarial science has a niche market with a decent pay package, but the probability of getting a job in CFA is higher. It is also relatively much more difficult than CFA.

Q5. I am not strong at Math, how do I prepare for quant part of CFA?

A good trainer and good,comprehensive and relevant question bank will help you.

You can view the webinar presentation below:

Got a question for us? Please mention them in the comments section and we will get back to you.

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Comments
1 Comment
  • divya

    This is a great blog !

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