The Chartered Financial Analyst is a unique international program of professionalism offered by the CFA Institute, an American based institute which was formerly known as the AIMR (Association for Investment Management & Research). The core aim of the Institute and the program it offers is to equip students with financial skills which can be applied in various international sectors worldwide.
The CFA exam is broken down into various levels to enable ease for teaching and its implementation. The preliminary stage of the program is referred to as the CFA level 1 which is also aimed at equipping students with the basic concepts of what’s entailed in the whole program. In a nutshell, this level focuses mostly on the tools alongside concepts which are fundamental to the investment valuation included in the management of financial assets.
The CFA is recognized globally as a standard for determining the competence level and integrity of most financial analysts and its exams are well structured to meet the specific needs of the curriculum. For instance, apart from the level one exam, there are other 2 extra exams provided for levels 2 and 3 respectively. However, this article will only focus on the level one program.
CFA level 1 is divided into 10 major topics. The first topic is Ethical and Professional Standards which is also subdivided into other various sub-topics. Under this first topic, the student has to cover Ethics and Trust in the Investment profession, an area which will consequently develop his/her skills in ensuring that he/she follows the rightfully accepted Code of Professional Conduct when performing his/her duties. The other associated areas are the Codes of Ethic and the Global investment performance Standards.
The second topic is Quantitative methods, a topic that majors in the various ways of effectively analyzing the financial methods in a quantitative way. The basic concepts of this topic include but are not limited to Understanding the time value of money- where the essence of money usage and or storage is rated with the time taken to perform the financial transactions. To add to that, the discounted cash flow applications, statistical concepts and market returns are also taught within the topic. Furthermore, the concepts of probability are also deliberated upon thus ensuring that the student is adequately equipped with the requisite skills to perform well in his/her examinations.
The application part of Quantitative methods also broadens to other sub-topics which include the common criteria for probability distributions, essence of sampling with estimation, testing of the hypothesis and a financial analysis which is technical in nature.
Economics is the immediate following topic after Quantitative methods. In this part of the program, the student is brought to light on the issues of Micro and Macroeconomics. Under these, the analysis of the demand and supply, the market structures of firms and the aggregate prices of the output including the economic growth aspect are all taught. The skills in understanding the various business cycles, which are imperative in financial investment, are also covered.
The next two topics are Financial Reporting and Analysis and Corporate Finance respectively. In these two topics, the students are informed on the various internationally acceptable ways of reporting final financial records. The issues to do with inventories, long-term assets, income taxes and those liabilities which are not current are well elaborated. The aspects of quality financial reporting, analysis of financial statement and the management of working capital are also dealt with.
The other remaining 5 topics of the Chartered Financial Analyst program include Portfolio Management, Equity Investments, Fixed Income analysis, Determination of Derivatives and ultimately the Alternative means of Investments. Each topic is well structured and comprehensive for ease of student learning during their coursework.
To sum up, the CFA level 1 exam takes 6 hours to write and has 240 questions in total. The format of the exam is a multiple choice while the passing rates vary annually around 45%.The course is also worthwhile and further increases one’s competency levels. To know more about the CFA level 1 exam, check out analystprep.com which is a site dedicated to this well-known exam.