Now that you are done with the dreaded financial reporting and analysis (FRA) topic it is time for a big pat on the back. If you have followed the instructions and mastered both the ethics and FRA topics you should be in good shape.
We discuss this in more depth elsewhere on the site, but basically the below scatter plot depicts the relationship between expected exam weight and curriculum weight (pages) for the 10 level 1 CFA® exam topics. As you can see FRA is the “heaviest” topic area on both measures, whereas Ethics is by far the topic area with the largest expected exam weight (15%) relative to its curriculum weighting (7.4%). You cannot afford to “mess up” any of these two, conversely a solid score on both topic areas will help propel you towards the desired exam result.
Source: Financial Exam Academy (Based on the CFA® exam – level 1 curriculum)
The week to come:
This week we are covering the corporate finance topic, the topic area shares space with portfolio management in curriculum book number 4, and contains 6 relatively short readings (between 28 and 44 pages each). The topic area is focused on the financial decisions of corporations in their pursuit to maximize shareholder value and in some cases (depending on corporate governance framework) broader stakeholder value as well.
The first 2 readings (capital budgeting and cost of capital) feature very heavily in terms of the number of LOS end of chapter questions compared to the remaining readings. The last two readings (working capital management and the corporate governance of listed companies) are particularly light on end of chapter questions. There is obviously no guarantee that the readings will be skewed in the same direction in terms of their weighting on the exam day, but it probably will not hurt paying extra attention to the first 2 readings.
We are going to use our standard study approach to master the corporate finance readings:
- Answer all of the end of chapter questions before going through each reading (There are 115 end of chapter questions in the 5 readings, this should take about 3 hours combined). As you answer the questions make a list of the questions that challenge you (especially if you need to guess the answer). Review your answers thoroughly and add the questions that you got wrong to your list. You will now have a complete list of the toughest questions in the reading seen from your perspective.
- Write down the LOS on flash cards so that you have them handy, and actively seek out and write down the answers on the flip side (with the page number) as you progress through each individual reading (It is crucial that you manage to focus on what is important in this reading). Also as you progress through the reading write down any key concepts or formulae that you come across on individual flash cards framed as a question, write the answer and page number on the flipside of the flashcards (for future reference).
- Answer only the EOC questions from your list once you are through each reading, and do this as many times as you need until you can answer all of the questions confidently (thankfully we are back to standard multiple choice questions in these readings, which should make the marking easier).