Cfa Notes
CFA Level I Study Notes
Working on: SS11: Financial Statement Analysis
SS 5 – Understanding Business Cycles
Table of Contents Study Session 3 – Assigned Reading #12 – Technical Analysis 4 Study Session 5 – Assigned Reading #18 – Understanding Business Cycles 13 Study Session 11 – Assigned Reading #36 – Capital Budgeting 15 Study Session 11 – Assigned Reading #37 – Cost of Capital 19 Study Session 11 – Assigned Reading #38 – Measures of Leverage 22 Study Session 11 – Assigned Reading #39 – Dividends and Share Repurchases 25 Study Session 11 – Assigned Reading #40 – Working Capital Management 29 Study Session 11 – Assigned Reading #41 – Financial Statement Analysis 33 Study Session 11 – Assigned Reading #42 – The Corporate Governance of Listed Companies: A Manual for Investors 34 Study Session 13 – Assigned Reading #47 – Market Organization Structure 35
Study Session 3 – Assigned Reading #12 – Technical Analysis
Technical analysis – study of collective market segment, as expressed in buying/selling of assets to predict future behaviour * Based on the idea that prices are determined by supply and demand * Individuals who trade affect the prices * Better informed individuals = buy in larger volumes * Key assumption: efficient markets hypothesis does not hold – market prices reflect both rational and irrational behavior * Uses share price and trading volume data to project a target price * Not concerned with identifying the reasons for trading, but only what trades have occurred * Advantage: actual price and volume data is observable, can be applied to the prices of assets that do not produce future cash flows (dividends or interest), such as commodities, can be used when fraud occurs * Disadvantages: limited in markets where price and volume data might not truly reflect supply and demand (e.g. illiquid markets and markets that can be manipulated; currency market)
Fundamental analysis – attempts to
Working on: SS11: Financial Statement Analysis
SS 5 – Understanding Business Cycles
Table of Contents Study Session 3 – Assigned Reading #12 – Technical Analysis 4 Study Session 5 – Assigned Reading #18 – Understanding Business Cycles 13 Study Session 11 – Assigned Reading #36 – Capital Budgeting 15 Study Session 11 – Assigned Reading #37 – Cost of Capital 19 Study Session 11 – Assigned Reading #38 – Measures of Leverage 22 Study Session 11 – Assigned Reading #39 – Dividends and Share Repurchases 25 Study Session 11 – Assigned Reading #40 – Working Capital Management 29 Study Session 11 – Assigned Reading #41 – Financial Statement Analysis 33 Study Session 11 – Assigned Reading #42 – The Corporate Governance of Listed Companies: A Manual for Investors 34 Study Session 13 – Assigned Reading #47 – Market Organization Structure 35
Study Session 3 – Assigned Reading #12 – Technical Analysis
Technical analysis – study of collective market segment, as expressed in buying/selling of assets to predict future behaviour * Based on the idea that prices are determined by supply and demand * Individuals who trade affect the prices * Better informed individuals = buy in larger volumes * Key assumption: efficient markets hypothesis does not hold – market prices reflect both rational and irrational behavior * Uses share price and trading volume data to project a target price * Not concerned with identifying the reasons for trading, but only what trades have occurred * Advantage: actual price and volume data is observable, can be applied to the prices of assets that do not produce future cash flows (dividends or interest), such as commodities, can be used when fraud occurs * Disadvantages: limited in markets where price and volume data might not truly reflect supply and demand (e.g. illiquid markets and markets that can be manipulated; currency market)
Fundamental analysis – attempts to