ROADMAP TO PASSING THE CFA® EXAM:

The PASSMAX success strategy is based on the concept of layering. Candidates will be
instructed to go over our course material in successive waves, with each subsequent wave
deepening your level of understanding as we get closer to Exam Day. The waves (or stages) will
be identified as follows:

1. Familiarity.
2. Understanding.
3. Application.

Stage 1: Develop Familiarity with the content.

Candidates will be instructed to go through the entire checklist of examinable items found in this
document. The CFA Institute has made it very clear that every exam question will be based on
one or more of these Learning Outcome Statements (LOSs). Therefore, by eventually mastering
these LOSs (i.e. testable items), you will have the maximum chance of passing the CFA Exam.

We have divided these LOSs into 2 groups:

i) Analytical / Challenge LOSs: For these, we have constructed lecture notes with accompanying
video clips. During Stage 1 of your preparation, you are advised to download the lecture booklet
(found at the beginning of each chapter module) and use it to follow along as you watch the
video clips for these LOSs.

ii) Qualitative / Self-Explanatory LOSs: For these, we have constructed study guides. During
Stage 1 of your preparation, you are advised to download the study guide (also found at the
beginning of each chapter module) and highlight passages that you feel the need to retain.

TIP: Rather than going through the Analytical and Qualitative LOSs separately, we suggest that
you go through the chapter LOSs in the order that they appear on the checklist (irrespective of
whether the LOS is Analytical or Qualitative). Furthermore, we have re-arranged the order in
which the CFA chapters are covered to ensure a smoother flow of material, one that better builds
on prerequisite knowledge.

After you have gone through all the LOSs for a chapter, at the end of that chapter module, you
will find a list of assigned practice questions from the CFA curriculum. During Stage 1, you are
advised to only look at the solutions (rather than trying to attempt the question on your own).
The goal at this stage is to plant seeds; not harvest crops. Practice questions will become our
priority during Stage 3. As well, for many of the challenge questions in the CFA curriculum, we
have developed our own set of solutions (which provide a more ground-up approach than those
found in the CFA books).

TIP: At this Stage, it is very common to feel that the material is not sinking in and/or knowledge
from previously covered chapters is dissipating. Not to worry. The important thing is that the
seeds have been planted.

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Stage 2: Deeper Understanding.

At this point, you will already have broken the ice on the entire curriculum. Therefore, go
through the checklist again (in the order presented) and make your own set of summary notes for
each LOS (using the guides and lecture booklets as your source of reference).
TIP: There is an undisputable link between the pen and the brain. Writing notes down will help
you retain the material much more effectively than just reading it alone. Furthermore, your own
set of summary notes will become your primary source of reference in the weeks and days
leading up to the exam.

When you have completed summarizing your notes for a chapter, you may then attempt the
assigned practice questions found at the end of that chapter module (rather than just simply
reviewing the solutions as you did in Stage 1). Nevertheless, do not spend too much time on one
question; if stuck, go straight to the solution or send us your inquiry. The CFA curriculum is
massive; you cannot afford to hold up your progress for just one item.

Stage 3: Application.

At this point (ideally 8 weeks before Exam Day), you should have your own set of notes for all
the LOSs. Therefore, at the very bottom of the course module, you will find the document which
includes the list of all the questions that you should attempt from the CFA curriculum. This list
divides the assigned questions into 2 groups:
 Priority1: These are high priority question that must absolutely be attempted. Note: these
would be the exact same questions that were assigned at the end of each chapter module.
Therefore, you will be going over these questions on 3 separate occasions, thus
developing the depth that is necessary in order master the chapter concepts.
 Priority2: These are 2nd tier questions that should be attempted only after the Priority1
questions for ALL of the study sessions have been completed. At this point, you are also
encouraged to attempt the online sample tests provided by the CFA Institute.

At the 3-week mark remaining before Exam Day, you should turn your attention to the practice
mock exams provided by the CFA Institute. Ideally, you need to attempt 3 complete mock exams
(with each encompassing an AM and PM section).

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POINTERS TO KEEP IN MIND THROUGHOUT YOUR PREP

 300 hours gets you in the door; 400 hours makes you a contender. The ideal prep
schedule should be spread out over 20 weeks with an ‘average’ input of 20 prep hours per
week.

 To extract the 20 hours of per week, it is recommended that candidates wake up at 5am
each morning (just like the investment pros) and get some prep done before heading off
to work. However, if you can only study in the evenings, then you are encouraged to
study immediately after work, rather than going home first. You want to study while you
are still fresh early in the evening. If you wait to get home first, you may be too
exhausted to put in any quality prep hours.

 To avoid burnout, have one rest day per week – absolutely no studying on that day.

 The PASSMAX program has everything you need. We have combed through all the
chapter readings in the CFA curriculum and extracted only that which is testable (using
the LOS as guidance). Therefore, you are not required to read the CFA curriculum
chapters yourself.

 You are also strongly encouraged not to use any 3 rd party Q-banks. The CFA examiners
will only be drawing questions from the curriculum (which is where our practice
questions are assigned from).

 The amount of testable material is massive; therefore, never get stuck on any one
particular item. If you don’t understanding something, flag it and then move on to the
next topic. Subsequently, you may bring these flagged items to our attention.
TIP: Don’t let what you can’t do stop you from what you can do.

 As much as possible, block off all other activities during the week before the CFA exam
(including work). You cannot afford any distractions during that final week.

 During the final week, your highest priority should be to revisit any flagged questions
from previously attempted Priority1 and CFA Mock Exam questions.

 Never give up: If you’re having a hard time, so is your competition. At the end, you will
come to realize that this exam is much a test of character as it is about knowledge.

©2020 PASSMAX. All Rights Reserved. pg. 3

LEARNING OUTCOME STATEMENT (LOS) CHECKLIST
In order to develop prerequisite knowledge, you are encouraged to go through the LOSs in the
following order:

2.6 TIME VALUE OF MONEY

2.6.a REQUIRED RATE OF RETURN
2.6.b COMPONENTS OF INTEREST RATE (REQUIRED RETURN)
2.6.c EFFECTIVE ANNUAL RATE vs. STATED ANNUAL INTEREST RATE
2.6.d TIME VALUE PROBLEMS
2.6.e PRESENT VALUE AND FUTURE VALUE OF CASH FLOW STREAMS
2.6.f TIME LINES

2.7 STATISTICAL CONCEPTS AND MARKET RETURNS

2.7.a.(i) DESCRIPTIVE AND INFERENTIAL STATISTICS
2.7.a.(ii) POPULATION AND A SAMPLE
2.7.a.(iii) MEASUREMENT SCALES
2.7.b FREQUENCY DISTRIBUTION
2.7.c RELATIVE FREQUENCY AND CUMULATIVE RELATIVE FREQUENCY
2.7.d HISTOGRAMS AND FREQUENCY POLYGONS
2.7.e MEASURES OF CENTRAL TENDENCY
2.7.f QUANTILES
2.7.g MEASURES OF DISPERSION
2.7.h CHEBYSHEV’S INEQUALITY
2.7.i COEFFICIENT OF VARIATION
2.7.j.k.l SKEW AND KURTOSIS
2.7.m ARITHMETIC VS. GEOMETRIC MEAN

2.8. PROBABILITY CONCEPTS

2.8.a RANDOM VARIABLES, OUTCOMES, AND EVENTS
2.8.b.(i) PROPERTIES OF PROBABILITY
2.8.b.(ii) EMPIRICAL, SUBJECTIVE, AND PRIORI PROBABILITIES
2.8.c ODDS FOR AND AGAINST
2.8.d UNCONDITIONAL AND CONDITIONAL PROBABILITIES
2.8.e.f COMPUTING PROBABILITIES
2.8.g DEPENDENT AND INDEPENDENT EVENTS
2.8.h.i.j.n PROBLEMS INVOLVING PROBABILITIES
2.8.k.m COVARIANCE AND CORRELATION
2.8.l EXPECTED VALUE AND VARIANCE
2.8.o COUNTING PROBLEMS

3.9 COMMON PROBABILITY DISTRIBUTIONS

3.9.a.(i) WHAT IS A PROBABILITY DISTRIBUTION
3.9.a.(ii) DISCRETE vs. CONTINUOUS RANDOM VARIABLES
3.9.b OUTCOMES OF RANDOM VARIABLES
3.9.c.(i) PROBABILITY FUNCTIONS
3.9.c.(ii) PROBABILITY DENSITY FUNCTION

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 3.9.c.(iii) CUMULATIVE DISTRIBUTION FUNCTION
3.9.d INTERPRETING PROBABILITIES, GIVEN A CUMULATIVE DISTRIBUTION
3.9.e.f TYPES OF RANDOM VARIABLES
3.9.g BINOMIAL TREES AND STOCK PRICES
3.9.h CONTINUOUS UNIFORM DISTRIBUTION
3.9.i NORMAL DISTRIBUTION
3.9.j.(i) UNIVARIATE AND MULTIVARIATE DISTRIBUTION
3.9.j.(ii) CORRELATION AND MULTIVARIATE DISTRIBUTION
3.9.k.l INTERVALS FOR NORMAL DISTRIBUTION
3.9.m SHORTFALL RISK AND ROY’S SAFETY FIRST RATIO
3.9.n LOGNORMAL vs. NORMAL DISTRIBUTION
3.9.o DISCRETE vs. CONTINUOUS COMPOUNDING
3.9.p.q SIMULATIONS: MONTE CARLO vs. HISTORIC

3.10 SAMPLING AND ESTIMATION

3.10.a.b SAMPLING
3.10.c SIMPLE vs. STRATIFIED SAMPLING
3.10.d TIME-SERIES vs. CROSS-SECTIONAL DATA
3.10.e.f CENTRAL LIMIT THEOREM
3.10.g DESIRABLE PROPERTIES OF AN ESTIMATOR
3.10.h.i.j CONFIDENCE INTERVALS
3.10.k.(i) SELECTING SAMPLE SIZE
3.10.k.(ii) OTHER SAMPLING ISSUES

3.11 HYPOTHESIS TESTING

3.11.a.d.g HYPOTHESIS TESTING
3.11.b ONE-TAIL vs. TWO-TAIL HYPOTHESIS TESTS
3.11.c TYPE I and TYPE II ERRORS
3.11.e. STATISTICAL vs. ECONOMIC DECISION
3.11.f P-VALUE
3.11.h TESTING THE EQUALITY BETWEEN TWO POPULATION MEANS
3.11.i MEAN DIFFERENCE OF TWO POPULATIONS
3.11.j(i) HYPOTHESIS TESTING THE VARIANCE OF A POPULATION
3.11.j(ii) TESTING THE EQUALITY BETWEEN TWO POPULATION VARIANCES
3.11.k HYPOTHESIS TESTING THE CORRELATION OF A POPULATION
3.11.l PARAMETRIC vs. NONPARAMETRIC TESTS

16.48 DERIVATIVE MARKETS AND INSTRUMENTS

16.48.a(i) DEFINING A DERIVATIVE
16.48.a(ii) EXCHANGE TRADED vs. OVER-THE-COUNTER (OTC)
16.48.b FORWARD COMMITMENTS vs. CONTINGENT CLAIMS
16.48.c(i) FORWARD CONTRACTS
16.48.c(ii) FUTURES CONTRACTS
16.48.c(iii) SWAPS
16.48.c(iv) CREDIT DERIVATIVES
16.48.d(i) CALL OPTIONS

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 16.48.d(ii) PUT OPTIONS
16.48.e(i) THE PURPOSES OF DERIVATIVE MARKETS
16.48.e(ii) THE CRITICISMS OF DERIVATIVE MARKETS
16.48.f THE ROLE OF ARBITRAGE

16.49 BASICS OF DERIVATIVE PRICING AND VALUATION

16.49.a PRINCIPLES OF DERIVATIVES PRICING
16.49.b.c.d.e FORWARD CONTRACTS: PRICING & VALUATION
16.49.f FORWARD RATE AGREEMENTS
16.49.g FUTURES CONTRACTS: PRICING & VALUATION
16.49.h.i SWAP CONTRACTS: PRICING & VALUATION
16.49.j OPTION CONTRACTS: PRICING & VALUATION
16.49.k FACTORS AFFECTING OPTION VALUE
16.49.l PUT-CALL PARITY (PCP)
16.49.m PUT-CALL-FORWARD PARITY (PCFP)
16.49.n VALUING OPTIONS USING BINOMIAL MODELS
16.49.o EUROPEAN vs. AMERICAN OPTIONS

14.42 FIXED INCOME SECURITIES: DEFINING ELEMENTS

14.42.a(i) BOND OVERVIEW
14.42.a(ii) BASIC FEATURES OF FIXED INCOME SECURITIES
14.42.b FUNCTIONS OF A BOND INDENTURE
14.42.c AFFIRMATIVE VS. NEGATIVE COVENANTS
14.42.d(i) LEGAL AND REGULATORY FACTORS AFFECTING THE ISSUANCE AND
TRADING OF FIXED INCOME SECURITIES
14.42.d(ii) TAX CONSIDERATIONS AFFECTING THE ISSUANCE AND TRADING OF
FIXED INCOME SECURITIES
14.42.e(i) PRINCIPAL STRUCTURE OF BONDS
14.42.e(ii) COUPON PAYMENT STRUCTURE OF BONDS
14.42.f CONTINGENCY PROVISIONS INCLUDED IN BONDS

14.43 FIXED INCOME MARKETS: ISSUANCE, TRADING, AND FUNDING

14.43.a CLASSIFICATIONS OF GLOBAL FIXED INCOME MARKETS
14.43.b INTERBANK OFFER RATES
14.43.c ISSUING BONDS IN PRIMARY MARKETS
14.43.d SECONDARY MARKETS FOR BONDS
14.43.e SECURITIES ISSUED BY SOVEREIGN GOVERNMENTS
14.43.f SECURITIES ISSUED BY NON-SOVEREIGN GOVERNMENTS
14.43.g TYPES OF DEBT ISSUED BY CORPORATIONS
14.43.h STRUCTURED FINANCIAL INSTRUMENTS (SFIs)
14.43.i SHORT TERM FUNDING AVAILABLE TO BANKS
14.43.j REPURCHASE AGREEMENTS (REPOS)

14.44 AN INTRODUCTION TO FIXED INCOME VALUATION

14.44.a COMPUTING BOND PRICE
14.44.b FACTORS AFFECTING BOND PRICE

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 14.44.c SPOT RATES
14.44.d FLAT vs. FULL PRICE
14.44.e MATRIX PRICING
14.44.f YIELD AND COMPOUNDING PERIODS
14.44.g(i) YIELD MEASURES FOR FIXED RATE BONDS
14.44.g(ii) YIELD MEASURES FOR FLOATING RATE NOTES (FRNs)
14.44.h MONEY MARKET INSTRUMENTS
14.44.i.j YIELDS, SPOTS, AND FORWARDS
14.44.k YIELD SPREAD MEASURES

14.45 INTRODUCTION TO ASSET-BACKED SECURITIES

14.45.a THE BENEFITS OF SECURITIZATION
14.45.b.c THE SECURITIZATION PROCESS
14.45.d RESIDENTIAL MORTGAGE LOANS
14.45.e.f(i) RESIDENTIAL MORTGAGE BACKED SECURITIES (RMBS)
14.45.e.f(ii) COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs)
14.45.g COMMERCIAL MORTGAGE BACKED SECURITIES (CMBS)
14.45.h NON-MORTGAGE ASSET BACKED SECURITIES (ABS)
14.45.i COLLATERALIZED DEBT OBLIGATIONS (CDOs)

15.46 UNDERSTANDING FIXED INCOME RISK AND RETURN

15.46.a SOURCES OF RETURN
15.46.b(i),k MACAULAY DURATION
15.46.b(ii) MODIFIED DURATION
15.46.c EFFECTIVE DURATION
15.46.d KEY RATE DURATION
15.46.e FACTORS AFFECTING INTEREST RATE RISK
15.46.f PORTFOLIO DURATION
15.46.g MONEY DURATION
15.46.h.i CONVEXITY
15.46.j TERM STRUCTURE OF YIELD VOLATILITY
15.46.l CREDIT AND LIQUIDITY RISK

15.47 FUNDAMENTALS OF CREDIT ANALYSIS

15.47.a.b.(i) CREDIT RISK
15.47.a.b.(ii) CREDIT-RELATED RISKS
15.47.c(i) SENIORITY RANKING
15.47.c(ii) PRIORITY OF CLAIMS
15.47.d CREDIT RATINGS
15.47.e RISKS IN RELYING ON AGENCY RATINGS
15.47.f.g.h TRADITIONAL CREDIT ANALYSIS
15.47.i YIELD SPREADS
15.47.j(i) EVALUATING HIGH YIELD DEBT
15.47.j(ii) EVALUATING SOVEREIGN DEBT
15.47.j(iii) EVALUATING MUNICIPAL DEBT

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4.12 TOPICS IN DEMAND AND SUPPLY ANALYSIS
4.12.a(i) OVERVIEW OF ELASTICITY
4.12.a(ii) PRICE ELASTICITY
4.12.a(iii) CROSS ELASTICITY
4.12.a(iv) INCOME ELASTICITY
4.12.a(v) CALCULATING ELASTICITIES
4.12.b SUBSTITUTION vs. INCOME EFFECTS
4.12.c NORMAL vs. INFERIOR GOODS
4.12.d DIMINISHING MARGINAL RETURNS
4.12.e(i) DEFINING PROFIT
4.12.e(ii) DERIVING REVENUE
4.12.e(iii) DERIVING COST
4.12.e(iv) PROFIT MAXIMIZATION
4.12.e(v) BREAKEVEN POINT OF PRODUCTION
4.12.e(vi) SHUTDOWN POINTS OF PRODUCTION
4.12.f ECONOMIES vs. DISECONOMIES OF SCALE

4.13 THE FIRM AND MARKET STRUCTURES

4.13.a CHARACTERISTICS OF THE DIFFERENT MARKET STRUCTURES
4.13.b.c.d.e.f.h(i) CHARACTERISTICS OF PERFECT COMPETITION
4.13.b.c.d.e.f.h(ii) CHARACTERISTICS OF MONOPOLISTIC COMPETITION
4.13.b.c.d.e.f.h(iii) CHARACTERISTICS OF AN OLIGOPOLY MARKET
4.13.b.c.d.e.f.h(iv) CHARACTERISTICS OF PURE MONOPOLY
4.13.g CONCENTRATION MEASURES

4.14 AGGREGATE OUTPUT, PRICES, AND ECONOMIC GROWTH

4.14.a GROSS DOMESTIC PRODUCT (GDP)
4.14.b METHODS OF CALCULATING GDP
4.14.c NOMINAL vs. REAL GDP
4.14.d GDP vs. INCOME
4.14.e FISCAL vs. TRADE BALANCE
4.14.f IS vs. LM
4.14.g AGGREGATE SUPPLY
4.14.h(i) SHIFTS vs. MOVEMENTS ALONG AGGREGATE DEMAND
4.14.h(ii) SHIFTS vs. MOVEMENTS ALONG AGGREGATE SUPPLY
4.14.i.j.k SHORT RUN CHANGES IN THE ECONOMY
4.14.l CHANGES IN AGGREGATE SUPPLY AND DEMAND
4.14.m.n.o SOURCES, MEASUREMENT, AND SUSTAINABILITY OF GROWTH

4.15 UNDERSTANDING BUSINESS CYCLES

4.15.a PHASES OF THE BUSINESS CYCLE
4.15.b UTILIZATION LEVELS IN A BUSINESS CYCLE
4.15.c THEORIES OF THE BUSINESS CYCLE
4.15.d THE TYPES AND MEASURES OF UNEMPLOYMENT
4.15.e INFLATION, DISINFLATION, AND DEFLATION
4.15.f MEASURING INFLATION

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 4.15.g COMPARING INFLATION MEASURES
4.15.h FACTORS THAT AFFECT PRICE LEVELS
4.15.i ECONOMIC INDICATORS

5.16 MONETARY AND FISCAL POLICY

5.16.a MONETARY vs. FISCAL POLICY
5.16.b(i) THE DEFINITION OF MONEY
5.16.b(ii) THE QUALITIES OF MONEY
5.16.b(iii) THE FUNCTIONS OF MONEY
5.16.c THE MONEY CREATION PROCESS
5.16.d THEORIES OF THE DEMAND FOR AND SUPPLY OF MONEY
5.16.e THE FISHER EFFECT
5.16.f THE ROLE OF CENTRAL BANKS
5.16.g THE COST OF UNEXPECTED INFLATION
5.16.h THE IMPLEMENTATION OF MONETARY POLICY
5.16.i THE MONETARY TRANSMISSION MECHANISM
5.16.j THE QUALITIES OF EFFECTIVE CENTRAL BANKS
5.16.k.l THE LINK BETWEEN MONETARY POLICY AND ECONOMIC VARIABLES
5.16.m EXPANSIONARY vs. CONTRACTIONARY MONETARY POLICY
5.16.n THE LIMITATIONS OF MONETARY POLICY
5.16.o THE ROLES AND OBJECTIVES OF FISCAL POLICY
5.16.p THE TOOLS OF FISCAL POLICY
5.16.q FISCAL DEFICIT CONCERNS
5.16.r THE IMPLEMENTATION OF FISCAL POLICY
5.16.s EXPANSIONARY vs. CONTRACTIONARY FISCAL POLICY
5.16.t THE INTERACTION OF MONETARY AND FISCAL POLICY

5.17 INTERNATIONAL TRADE AND CAPITAL FLOWS

5.17.a GROSS DOMESTIC PRODUCT (GDP) vs. GROSS NATIONAL PRODUCT
(GNP)
5.17.b(i) THE BENEFITS OF INTERNATIONAL TRADE
5.17.b(ii) THE COSTS OF INTERNATIONAL TRADE
5.17.c COMPARATIVE vs. ABSOLUTE ADVANTAGE
5.17.d TRADE MODELS
5.17.e TRADE RESTRICTIONS
5.17.f TRADING BLOCS, COMMON MARKETS, AND ECONOMIC UNIONS
5.17.g CAPITAL RESTRICTIONS
5.17.h THE BALANCE OF PAYMENTS (BOP)
5.17.i FACTORS INFLUENCING THE BALANCE OF PAYMENTS
5.17.j INTERNATIONAL TRADE ORGANIZATIONS

5.18 CURRENCY EXCHANGE RATES

5.18.a EXCHANGE RATES
5.18.b THE FOREIGN EXCHANGE MARKETS
5.18.c CURRENCY PERCENTAGE CHANGE
5.18.d CROSS RATES

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 5.18.e.g FORWARD PREMIUM AND DISCOUNT
5.18.f.h SPOTS, FORWARDS, AND INTEREST RATES
5.18.i EXCHANGE RATE REGIMES
5.18.j IMPACT OF EXCHANGE RATES

6.19 INTRO TO FINANCIAL STATEMENT ANALYSIS

6.19.a(i) THE ROLE OF FINANCIAL REPORTING
6.19.a(ii) THE ROLE OF FINANCIAL STATEMENT ANALYSIS
6.19.b(i) THE KEY FINANCIAL STATEMENTS
6.19.b(ii) THE ROLE OF THE KEY FINANCIAL STATEMENTS
6.19.c NOTES AND SUPPLEMENTARY INFORMATION
6.19.d AUDITS AND INTERNAL CONTROLS
6.19.e INFORMATION SOURCES OTHER THAN FINANCIAL STATEMENTS
6.19.f STEPS IN THE FINANCIAL STATEMENT ANALYSIS FRAMEWORK

6.20 FINANCIAL REPORTING STANDARDS

6.20.a(i) THE OBJECTIVE OF FINANCIAL STATEMENTS
6.20.a(ii) THE IMPORTANCE OF REPORTING STANDARDS IN SECURITY
ANALYSIS AND VALUATION
6.20.b THE ROLE OF STANDARD SETTING BODIES AND REGULATORY BODIES
6.20.c(i) THE INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
FRAMEWORK
6.20.c(ii) THE OBJECTIVES OF FINANCIAL STATEMENTS
6.20.c(iii) QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS
6.20.c(iv) CONSTRAINTS IN PREPARING FINANCIAL STATEMENTS
6.20.c(v) ASSUMPTIONS IN PREPARING FINANCIAL STATEMENTS
6.20.c(vi) REQUIRED REPORTING ELEMENTS
6.20.d GENERAL REQUIREMENTS FOR FINANCIAL STATEMENTS
6.20.e(i) IMPLICATION OF ALTERNATIVE FINANCIAL REPORTING SYSTEMS
FOR FINANCIAL ANALYSIS
6.20.e(ii) MONITORING FINANCIAL REPORTING STANDARDS

7.21 UNDERSTANDING THE INCOME STATEMENT

7.21.a COMPONENTS OF THE INCOME STATEMENT
7.21.b.c REVENUE RECOGNITION
7.21.d EXPENSE RECOGNITION
7.21.e(i) FINANCIAL REPORTING AND ANALYSIS OF NONRECURRING ITEMS
7.21.e(ii) FINANCIAL REPORTING AND ANALYSIS OF CHANGES IN
ACCOUNTING STANDARDS
7.21.f OPERATING AND NONOPERATING COMPONENTS OF THE INCOME
STATEMENT
7.21.g.h(i) EARNINGS PER SHARE – SIMPLE STRUCTURE
7.21.g.h(ii) EARNINGS PER SHARE – COMPLEX STRUCTURE
7.21.i.j COMMON SIZE INCOME STATEMENT AND RATIOS
7.21.k COMPREHENSIVE INCOME
7.21.l OTHER COMPREHENSIVE INCOME (OCI)

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7.22 UNDERSTANDING THE BALANCE SHEET
7.22.a. THE COMPONENTS OF THE BALANCE SHEET
7.22.b THE LIMITATIONS OF BALANCE SHEETS
7.22.c FORMATS OF BALANCE SHEET PRESENTATION
7.22.d CURRENT AND NONCURRENT ASSETS AND LIABILITIES
7.22.e(i) MEASUREMENT BASES OF ASSETS AND LIABILITIES
7.22.e(ii) CURRENT ASSETS
7.22.e(iii) CURRENT LIABILITIES
7.22.e(iv) NON-CURRENT ASSETS: TANGIBLES
7.22.e(v) NON-CURRENT ASSETS: INTANGIBLES
7.22.e(vi) NON-CURRENT LIABILITIES
7.22.e(vii) FINANCIAL ASSETS
7.22.f THE COMPONENTS OF OWNER’S EQUITY
7.22.g COMMON SIZE BALANCE SHEETS
7.22.h LIQUIDITY AND SOLVENCY RATIOS

7.23 UNDERSTANDING THE CASH FLOW STATEMENT

7.23.a CATEGORIES OF THE STATEMENT OF CASH FLOWS
7.23.b REPORTING OF NONCASH INVESTING AND FINANCING ACTIVITIES
7.23.c DIFFERENCES IN SCF REPORTING UNDER THE IFRS AND US GAAP
7.23.d THE DIRECT AND INDIRECT METHOD FOR COMPUTING CFO.
7.23.e LINKING SCF TO INCOME STATEMENT AND BALANCE SHEET
7.23.f.g(i) CASH FLOW FROM OPERATIONS – DIRECT METHOD
7.23.f.g(ii) CASH FLOW FROM OPERATIONS – INDIRECT METHOD
7.23.f.g(iii) CASH FLOW FROM INVESTING
7.23.f.g(iv) CASH FLOW FROM FINANCING
7.23.h ANALYZING CASH FLOW STATEMENTS
7.23.i(i) FREE CASH FLOW
7.23.i(ii) CASH FLOW RATIOS

7.24 FINANCIAL ANALYSIS TECHNIQUES

7.24.a(i) RATIO ANALYSIS
7.24.a(ii) LIMITATIONS OF RATIO ANALYSIS
7.24.a(iii) COMMON SIZE ANALYSIS
7.24.b.c.(i) COMPUTE AND INTERPRET ACTIVITY RATIOS
7.24.b.c.(ii) COMPUTE AND INTERPRET LIQUIDITY RATIOS
7.24.b.c.(iii) COMPUTE AND INTERPRET SOLVENCY RATIOS
7.24.b.c.(iv) COMPUTE AND INTERPRET PROFITABILITY RATIOS
7.24.b.c.(v) COMPUTE AND INTERPRET VALUATION RATIOS
7.24.d DUPONT ANALYSIS
7.24.e(i) RATIOS USED IN EQUITY ANALYSIS
7.24.e(ii) RATIOS USED IN CREDIT ANALYSIS
7.24.f SEGMENT REPORTING
7.24.g EARNINGS FORECAST USING RATIO ANALYSIS

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8.25 INVENTORIES
8.25.a COST COMPONENTS OF INVENTORY
8.25.b INVENTORY VALUATION METHODS
8.25.c(i) IMPACT OF INVENTORY VALUATION ON FINANCIAL STATEMENTS
8.25.c(ii) PERIODIC vs. PERPETUAL INVENTORY SYSTEMS
8.25.d IMPACT OF INVENTORY COST INFLATION AND DEFLATION
8.25.e.f LIFO RESERVE
8.25.g.h MEASUREMENT OF INVENTORY AT LOWER OF COST OR MARKET
8.25.i PRESENTATION AND DISCLOSURES RELATING TO INVENTORY
8.25.j INVENTORY DISCLOSURES
8.25.k.l INVENTORY VALUATION

8.26 LONG-LIVED ASSETS

8.26.a.c.(i) CAPITALIZING vs. EXPENSING LONG LIVED ASSET COSTS
8.26.a.c.(ii) ISSUES ASSOCIATED WITH CAPITALIZING
8.26.b INTANGIBLE ASSETS
8.26.d DEPRECIATION METHODS
8.26.e IMPACT OF DEPRECIATION METHODS on F/S and RATIOS
8.26.f.g AMORTIZATION OF INTANGIBLE ASSETS
8.26.h THE REVALUATION MODEL
8.26.i IMPAIRMENT OF LONG TERM ASSETS
8.26.j DE-RECOGNITION OF LONG TERM ASSETS
8.26.k EFFECTS OF IMPAIRMENT on F/S and RATIOS
8.26.l PRESENTATION AND DISCLOSURE FOR LONG TERM ASSETS
8.26.m ANALYZING LONG LIVED ASSET DISCLOSURES
8.26.n FINANCIAL REPORTING OF INVESTMENT PROPERTY

8.27 INCOME TAXES

8.27.a.f.h DEFERRED TAXES
8.27.b FINANCIAL ANALYSIS OF DEFERRED TAXES
8.27.c TAX BASE
8.27.d.e IMPACT OF CHANGES IN TAX RATE
8.27.g VALUATION ALLOWANCE
8.27.i DISCLOSURES RELATED TO DEFERRED TAX ITEMS
8.27.j INCOME TAX ACCOUNTING: US GAAP vs. IFRS

8.28 NON-CURRENT (LONG TERM) LIABILITIES

8.28.a.b RECOGNITION & MEASUREMENT OF BONDS
8.28.c DE-RECOGNITION OF DEBT
8.28.d THE ROLE OF DEBT COVENANTS
8.28.e(i) THE FINANCIAL STATEMENT PRESENTATION OF DEBT
8.28.e(ii) DISCLOSURES RELATING TO DEBT
8.28.f THE MOTIVATIONS FOR LEASING ASSETS
8.28.g.h LEASES
8.28.i(i) DEFINED CONTRIBUTION PENSION

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 8.28.i(ii) DEFINED BENEFIT PENSION
8.28.j LEVERAGE AND COVERAGE RATIOS

9.29 FINANCIAL REPORTING QUALITY

9.29.a FINANCIAL REPORTING QUALITY
9.29.b REPORTING QUALITY SPECTRUM
9.29.c CONSERVATIVE vs. AGGRESSIVE ACCOUNTING
9.29.d MOTIVATIONS FOR ISSUING LOW QUALITY REPORTS
9.29.e CONDITIONS THAT ARE CONDUCIVE TO ISSUING LOW QUALITY REPORTS
9.29.f MECHANISMS THAT DISCIPLINE REPORTING QUALITY
9.29.g METHODS USED TO INFLUENCE ANALYST’S OPINION
9.29.h THE IMPACT OF ACCOUNTING METHODS ON FINANCIAL STATEMENTS
9.29.i ACCOUNTING WARNING SIGNS

9.30 FINANCIAL STATEMENT ANALYSIS: APPLICATIONS

9.30.a EVALUATING PAST FINANCIAL PERFORMANCE
9.30.b PROJECTING A COMPANY’S FUTURE NET INCOME AND CASH FLOW
9.30.c ASSESSING THE CREDIT QUALITY OF A POTENTIAL DEBT INVESTMENT
9.30.d SCREENING FOR POTENTIAL EQUITY INVESTMENTS
9.30.e FINANCIAL STATEMENT ADJUSTMENTS IN ORDER TO FACILITATE
COMPARISON AMONG COMPANIES

18.51 PORTFOLIO MANAGEMENT: AN OVERVIEW

18.51.a IMPORTANCE OF THE PORTFOLIO PERSPECTIVE
18.51.b THE PORTFOLIO MANAGEMENT PROCESS
18.51.c TYPES OF INVESTMENT CLIENTS
18.51.d PENSION PLANS
18.51.e ASPECTS OF THE ASSET MANAGEMENT INDUSTRY
18.51.f MUTUAL FUNDS AND OTHER POOLED INVESTMENTS

18.52 PORTFOLIO RISK AND RETURN: PART I

18.52.a(i) MEASURES OF RETURN
18.52.a(ii) ANNUALIZING RETURNS
18.52.a(iii) GROSS vs. NET RETURN
18.52.a(iv) REAL vs. NOMINAL RETURN
18.52.a(v) LEVERAGED RETURN
18.52.b MONEY WEIGHTED vs. TIME WEIGHTED RETURN
18.52.c ASSET CHARACTERISTICS
18.52.d MEAN, VARIANCE, AND COVARIANCE OF ASSET RETURNS
18.52.e RISK AVERSION
18.52.f.g EFFECTS OF CORRELATION ON PORTFOLIO RISK
18.52.h MINIMUM VARIANCE AND EFFICIENT FRONTIER
18.52.i SELECTING THE OPTIMAL PORTFOLIO

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18.53 PORTFOLIO RISK AND RETURN: PART II
18.53.a.b COMBINING THE RISK FREE ASSET WITH THE EFFICIENT FRONTIER
18.53.c SYSTEMATIC AND UNSYSTEMATIC RISKS
18.53.d RETURN GENERATING MODELS
18.53.e BETA
18.53.f(i) RATIONALE FOR THE CAPITAL ASSET PRICING MODEL (CAPM)
18.53.f(ii) ASSUMPTIONS OF THE CAPM
18.53.g USING CAPM TO ESTIMATE EXPECTED RETURN
18.53.h.i APPLICATIONS OF THE CAPM AND THE SML.

19.54 BASICS OF PORTFOLIO PLANNING AND CONSTRUCTION

19.54.a THE INVESTMENT POLICY STATEMENT (IPS)
19.54.b THE COMPONENTS OF AN IPS
19.54.c RISK AND RETURN OBJECTIVES
19.54.d ANALYZING AN INVESTOR’S RISK TOLERANCE
19.54.e INVESTMENT CONSTRAINTS
19.54.f SPECIFICATION OF ASSET CLASSES
19.54.g THE PRINCIPLES OF PORTFOLIO CONSTRUCTION
19.54.h IMPACT OF ESG CONSIDERATIONS ON PORTFOLIOS

19.55 INTRODUCTION TO RISK MANAGEMENT

19.55.a DEFINING RISK MANAGEMENT
19.55.b FEATURES OF A RISK MANAGEMENT FRAMEWORK
19.55.c RISK GOVERNANCE
19.55.d RISK TOLERANCE
19.55.e RISK BUDGETING
19.55.f SOURCES OF RISK
19.55.g(i) MEASURING RISK EXPOSURES
19.55.g(ii) MODIFYING RISK EXPOSURES

19.56 TECHNICAL ANALYSIS

19.56.a PRINCIPLES OF TECHNICAL ANALYSIS
19.56.b INTERPRETING TECHNICAL CHARTS
19.56.c(i) TREND LINES
19.56.c(ii) SUPPORT AND RESISTANCE LEVELS
19.56.d CHART PATTERNS
19.56.e(i) PRICE BASED INDICATORS
19.56.e(ii) MOMENTUM OSCILLATORS
19.56.e(iii) SENTIMENT INDICATORS
19.56.e(iv) FLOW OF FUNDS INDICATORS
19.56.f CYCLES
19.56.g THE ELLIOT WAVE THEORY
19.56.h INTERMARKET ANALYSIS

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19.57 FINTECH IN INVESTMENT MANAGEMENT
19.57.a DESCRIBING ‘FINTECH’
19.57.b(i) BIG DATA
19.57.b(ii) ARTIFICIAL INTELLIGENCE (AI) and MACHINE LEARNING (ML)
19.57.c FINTECH APPLICATIONS TO INVESTMENT MANAGEMENT
19.57.d DISTRIBUTED LEDGER TECHNOLOGY (DLT)

10.31 INTRO TO CORPORATE GOVERNANCE AND OTHER ESG CONSIDERATIONS

10.31.a CORPORATE GOVERNANCE
10.31.b COMPANY STAKEHOLERS
10.31.c THE PRINCIPAL-AGENT RELATIONSHIP
10.31.d.e STAKEHOLDER MANAGEMENT
10.31.f THE BOARD OF DIRECTORS
10.31.g FACTORS AFFECTING STAKEHOLDER RELATIONSHIPS
10.31.h(i) THE RISKS OF POOR CORPORATE GOVERNANCE
10.31.h(ii) THE BENEFITS OF AN EFFECTIVE CORPORATE GOVERNANCE
10.31.i ANALYSIS OF CORPORATE GOVERNANCE
10.31.j.k ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) CONSIDERATIONS

10.32 CAPITAL BUDGETING

10.32.a(i) CAPITAL BUDGETING PROCESS
10.32.a(ii) CATEGORIES OF CAPITAL PROJECTS
10.32.b PRINCIPLES OF CAPITAL BUDGETING
10.32.c PROJECT INTERACTIONS
10.32.d PROJECT EVALUATION METHODS
10.32.e.f NPV PROFILE
10.32.g NPV RELATION TO STOCK PRICE

10.33 COST OF CAPITAL

10.33.a.b WEIGHTED AVERAGE COST OF CAPITAL (WACC)
10.33.c TARGET CAPITAL STRUCTURE
10.33.d OPTIMAL CAPITAL BUDGET
10.33.e MARGINAL COST OF CAPITAL
10.33.f COST OF DEBT
10.33.g COST OF PREFERRED STOCK
10.33.h COST OF COMMON EQUITY
10.33.i PROJECT BETA
10.33.j COUNTRY RISK PREMIUM
10.33.k MARGINAL COST OF CAPITAL SCHEDULE
10.33.l FLOATATION COSTS

11.34 MEASURES OF LEVERAGE

11.34.a DEFINING RISKS
11.34.b MEASURING THE DEGREES OF LEVERAGE
11.34.c THE EFFECTS OF FINANCIAL LEVERAGE
11.34.d.e BREAK EVEN QUANTITIES OF SALES

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11.35 WORKING CAPITAL MANAGEMENT
11.35.a(i) PRIMARY AND SECONDARY SOURCES OF LIQUIDITY
11.35.a(ii) FACTORS THAT INFLUENCE A COMPANY’S LIQUIDITY POSITION
11.35.b LIQUIDITY MEASURES
11.35.c OPERATING CYCLE
11.35.d MANAGING THE NET DAILY CASH POSITION
11.35.e EVALUATION OF SHORT TERM INVESTMENT POLICIES
11.35.f(i) ASSESSING ACCOUNTS RECEIVABLE PERFORMANCE
11.35.f(ii) ASSESSING INVENTORY MANAGEMENT PERFORMANCE
11.35.f(iii) ASSESSING ACCOUNTS PAYABLE PERFORMANCE
11.35.f(iv) EVALUATING TRADE DISCOUNTS
11.35.g(i) SHORT TERM FUNDING ALTERNATIVES
11.35.g(ii) CHOOSING A SHORT TERM FINANCING METHOD

12.36 MARKET ORGANIZATION AND STRUCTURE

12.36.a THE MAIN FUNCTIONS OF THE FINANCIAL SYSTEM
12.36.b CLASSIFICATION OF ASSETS AND MARKETS
12.36.c(i) MAJOR TYPES OF SECURITIES
12.36.c(ii) MAJOR TYPES OF CURRENCIES
12.36.c(iii) MAJOR TYPES OF (DERIVATIVE) CONTRACTS
12.36.c(iv) MAJOR TYPES OF COMMODITIES
12.36.c(v) MAJOR TYPES OF REAL ASSETS
12.36.d TYPES OF FINANCIAL INTERMEDIARIES
12.36.e POSITIONS THAT MAY BE TAKEN
12.36.f(i) LEVERAGE and MARGIN
12.36.f(ii) MARGIN CALL
12.36.g.h EXECUTION, VALIDITY, AND CLEARING INSTRUCTIONS
12.36.i PRIMARY vs. SECONDARY MARKETS
12.36.j QUOTE DRIVEN, ORDER DRIVEN, AND BROKERED MARKETS
12.36.k CHARACTERISTICS OF A WELL FUNCTIONING MARKET
12.36.l OBJECTIVES OF MARKET REGULATION

12.37 SECURITY MARKET INDICES

12.37.a MARKET INDEX
12.37.b INDEX RETURNS
12.37.c ISSUES IN INDEX CONSTRUCTION
12.37.d.e INDEX CONSTRUCTION
12.37.f REBALANCING AND RECONSTITUTION
12.37.g USES OF SECURITY MARKET INDICES
12.37.h TYPES OF EQUITY INDICES
12.37.i TYPES OF FIXED INCOME INDICES
12.37.j INDICES REPRESENTING ALTERNATIVE INVESTMENTS
12.37.k TYPES OF SECURITY MARKET INDICES

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12.38 MARKET EFFICIENCY
12.38.a THE IMPORTANCE OF MARKET EFFICIENCY
12.38.b MARKET VALUE vs. INTRINSIC VALUE
12.38.c THE FACTORS AFFECTING A MARKET’S EFFICIENCY
12.38.d THE VARIOUS FORMS OF MARKET EFFICIENCY
12.38.e THE IMPLICATIONS OF EACH FORM OF MARKET EFFICIENCY
12.38.f ANOMALIES AND POSSIBLE INCONSISTENCIES WITH MARKET EFFICIENCY
12.38.g BEHAVIORAL FINANCE vs. TRADITIONAL FINANCE

13.39 OVERVIEW OF EQUITY SECURITIES

13.39.a THE VARIOUS TYPES OF EQUITY SECURITIES
13.39.b DIFFERENCES IN VOTING RIGHTS
13.39.c PUBLIC vs. PRIVATE EQUITY SECURITIES
13.39.d INVESTING IN NON-DOMESTIC EQUITY SECURITIES
13.39.e RISK AND RETURN CHARACTERISTIC OF EQUITY SECURITIES
13.39.f THE ROLE OF EQUITY SECURITIES
13.39.g MARKET VALUE vs. BOOK VALUE
13.39.h COST OF EQUITY vs. REQUIRED RETURN

13.40 INTRODUCTION TO INDUSTRY AND COMPANY ANALYSIS

13.40.a THE USES OF INDUSTRY ANALYSIS
13.40.b(i) METHODS BY WHICH COMPANIES MAY BE GROUPED
13.40.b(ii) CURRENT INDUSTRY CLASSIFICATION SYSTEMS
13.40.c LIMITATIONS OF INDUSTRY DESCRIPTORS
13.40.d PEER GROUP vs. INDUSTRY CLASSIFICATION
13.40.e ELEMENTS OF INDUSTRY ANALYSIS
13.40.f PRINCIPLES OF STRATEGIC ANALYSIS FOR AN INDUSTRY
13.40.g FACTORS AFFECTING THE RETURN ON INVESTED CAPITAL AND PRICING
POWER
13.40.h PRODUCT AND INDUSTRY LIFE CYCLE MODELS
13.40.i CHARACTERISTICS OF THE DIFFERENT INDUSTRIES
13.40.j FACTORS INFLUENCING INDUSTRY GROWTH
13.40.k ELEMENTS OF A COMPANY ANALYSIS

13.41 EQUITY VALUATION: CONCEPTS AND BASIC TOOLS

13.41.a PRICE vs. INTRINSIC VALUE
13.41.b VALUATION MODELS FOR STOCKS
13.41.c FORMS OF DIVIDEND
13.41.d DIVIDEND PAYMENT CHRONOLOGY
13.41.e PRESENT VALUE MODELS
13.41.f VALUING PREFERRED STOCKS
13.41.g(i) GORDON (CONSTANT) GROWTH MODEL
13.41.g(ii) MULTI-STAGE VALUATION MODEL
13.41.h APPROPRIATE MODEL SELECTION
13.41.i.j MULTIPLIER APPROACH TO VALUATION
13.41.k ENTERPRISE VALUE

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 13.41.l ASSET BASED VALUATION MODELS
13.41.m ADVANTAGES & DISADVANTAGES of EACH VALUATION MODEL

17.50 INTRO TO ALTERNATIVE INVESTMENTS

17.50.a ALTERNATIVE vs. TRADITIONAL INVESTMENTS
17.50.b.e CATEGORIES OF ALTERNATIVE INVESTMENTS
17.50.c BENEFITS OF ALTERNATIVE INVESTMENTS TO A PORTFOLIO
17.50.d(i) HEDGE FUND FEES and RETURNS
17.50.d(ii) FUND-OF-FUND FEES and RETURNS
17.50.f RISK MANAGEMENT OF ALTERNATIVE INVESTMENTS

1.1 ETHICS AND TRUST IN THE INVESTMENT PROFESSION

1.1.a ETHICS EXPLAINED
1.1.b THE ROLE OF ETHICS IN THE INVESTMENT PROFESSION
1.1.c HOW PROFESSIONS ESTABLISH TRUST
1.1.d ETHICAL STANDARDS IN THE INVESTMENT INDUSTRY
1.1.e PROFESSIONALISM IN INVESTMENT MANAGEMENT
1.1.f CHALLENGES TO ETHICAL BEHAVIOR
1.1.g ETHICAL vs. LEGAL STANDARDS
1.1.h ETHICAL DECISION MAKING FRAMEWORK

1.2 CODE OF ETHICS and STANDARDS OF PROFESSIONAL CONDUCT

1.2.a THE PROFESSIONAL CONDUCT PROGRAM AND THE ENFORCEMENT OF
THE CODE AND STANDARDS
1.2.b.c THE SIX CODES and THE SEVEN STANDARDS

1.3 GUIDANCE FOR STANDARDS I-VII

1.3.a.b.c APPLICATION OF THE CODE AND STANDARDS

1.4 INTRO TO THE GLOBAL INVESTMENT PERFORMANCE STANDARDS (GIPS)

1.4.a(i) WHY GIPS WERE CREATED
1.4.a(ii) PARTIES AFFECTED BY GIPS
1.4.b COMPOSITES
1.4.c VERIFICATION

1.5 GLOBAL INVESTMENT PERFORMANCE STANDARDS (GIPS)

1.5.a(i) KEY CHARACTERISTICS OF GIPS
1.5.a(ii) FUNDAMENTAL OF COMPLIANCE WITH GIPS
1.5.b THE SCOPE OF THE GIPS STANDARDS
1.5.c CONFLICT BETWEEN GIPS AND LOCAL LAWS
1.5.d THE MAJOR SECTIONS OF GIPS

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