CFA Level 1 Complete Exam Study Guide
with Verified Answers | Guaranteed A+
Form DEF-14A
When a company prepares a proxy statement for its shareholders before the annual meeting or
other shareholder vote, it also files the statement with the SEC as Form X.
Form 8-K
Companies must file this form to disclose material events including significant asset acquisitions
and disposals, changes in management or corporate governance, or matters related to its
accountants, its financial statements, or the markets in which its securities trade.
Form S-1
This is the registration statement filed before the sale of new securities to the public. The
statement includes disclosures about the securities offered, audited financial statements (plus
interim accounts, if the statement is filed more than three months after year-end), risk
assessment, underwriter identification, and the estimated amount and use of the offering
proceeds.
Form 144-A
A company can issue securities to certain qualified buyers without registering the securities with
the SEC, but it must notify the SEC that it intends to do so.
Forms 3, 4, and 5
Involve the beneficial ownership of securities by a company's officers and directors. Analysts can
use these filings to learn about purchases and sales of company securities by corporate insiders.
Proxy statements
Are issued to shareholders when there are matters that require a shareholder vote. These
statements, which are also filed with the SEC, are a good source of information about the
election of (and qualifications of) board members, compensation, management qualifications,
and the issuance of stock options.
Financial statement notes (footnotes)
Disclosures with details about the information summarized in financial statements. Footnotes
allow users to improve their assessments of the amount, timing, and uncertainty of the
,estimates in financials.
•They discuss the basis of presentation such as the fiscal period covered by the statements,
whether IFRS or U.S. GAAP is adhered to, and the inclusion of consolidated entities.
•Provide accounting methods, assumptions, and estimates used by management.
• Business acquisitions or disposals, legal actions, employee benefit plans, contingencies and
commitments, significant customers, related party transactions, position and performance of
segments of the firm, and significant post balance sheet events.
•They are audited along with the primary financial statements.
The five steps in revenue recognition are as follows:
Step 1: Identify the contract or contracts with the customer.
Step 2: Identify the performance obligations in the contract(s).
Step 3: Determine a transaction price.
Step 4: Allocate the transaction price to the performance obligations.
Step 5: Recognize revenue when (or as) the performance obligations have been satisfied.
Straight Line Depreciation
(Cost - Residual Value) / # Useful Years
Double Declining Balance Depreciation
(2/Useful Years) X (Cost - Accumulated depreciation)
Asset depreciated only until it's net book value equals its residual value.
Fixed Asset Turnover
Revenue/Avg Fixed Assets
Avg Fixed Asset = Accumulated Depreciation/Depreciation Expense
Higher = Better
Lower= Using assets inefficiently
Depreciation method impact ratio
Average Age Fixed Asset
Not required to be disclosed but analyst can find:
Accumulated Depreciated/Annual Depreciation
,* Analyst can identify firm older inefficient assets
*Identify need for major capital investment
Total Useful Life
Historical Cost/Annual depreciation
Remaining Useful Life
Net PPE/ Annual Depreciation
OR
Total Useful Life - Avg Age = Remaining Useful Life
OR estimate
CV (cost PPE - accumulated dep) /Annual depreciation
Net Recievables
Amounts owed by customers - allowance doubtful accounts
Interest Coverage Ratio
EBIT/Interest Expense
Receivables Turnover (Active)
Revenue/ Avg. Receivables
Measures operating efficiency -how well firm is managing assets and collecting cash.
High receivables turnover: Could be pulling forward collections by offering large discounts to
pay promptly; or penalties if you pay late
Days Sale Outstanding (Active)
365 / Receivables Turnover
Avg. number of days it takes for customers to pay
Avg credit extended could be 30:
DSO 15 means customers are paying sooner
DSO 45 customers overdue
Inventory Turnover (Active)
, COGS/ Avg. Inventory
High ratio: effective management, lower inventory vs. cost to sell , but if too low could be
missing out on sales
Low ratio: high level inventory could signal obsolete inventory or slow selling
Days Inventory on Hand (Active)
365/ Inventory Turnover
how many days of sales a company can make with its current inventory, similar to how many
days you can survive with the food in your pantry
Payables Turnover (Active)
Purchases/ Avg. trade payables. ( how quickly firm pays suppliers)
Beginning inventory + purchases - ending inventory = COGS
Purchases = End Inventory - Beginning Inventory + COGS
Too high could not be taking advantage of credit terms and paying suppliers too early - or could
be paying suppliers early for a discount
Number of days payable (Active)
365/ Payables Turnover
How long it takes on average to pay off suppliers.
Low: Paying suppliers too quickly, may run into cash flow problems or you have excess of cash
Fixed Asset Turnover (Active)
Revenue/ Avg. Fixed Assets
Higher = Better
Lower= Using assets inefficiently
Depreciation method impact ratio
Finance Lease
with Verified Answers | Guaranteed A+
Form DEF-14A
When a company prepares a proxy statement for its shareholders before the annual meeting or
other shareholder vote, it also files the statement with the SEC as Form X.
Form 8-K
Companies must file this form to disclose material events including significant asset acquisitions
and disposals, changes in management or corporate governance, or matters related to its
accountants, its financial statements, or the markets in which its securities trade.
Form S-1
This is the registration statement filed before the sale of new securities to the public. The
statement includes disclosures about the securities offered, audited financial statements (plus
interim accounts, if the statement is filed more than three months after year-end), risk
assessment, underwriter identification, and the estimated amount and use of the offering
proceeds.
Form 144-A
A company can issue securities to certain qualified buyers without registering the securities with
the SEC, but it must notify the SEC that it intends to do so.
Forms 3, 4, and 5
Involve the beneficial ownership of securities by a company's officers and directors. Analysts can
use these filings to learn about purchases and sales of company securities by corporate insiders.
Proxy statements
Are issued to shareholders when there are matters that require a shareholder vote. These
statements, which are also filed with the SEC, are a good source of information about the
election of (and qualifications of) board members, compensation, management qualifications,
and the issuance of stock options.
Financial statement notes (footnotes)
Disclosures with details about the information summarized in financial statements. Footnotes
allow users to improve their assessments of the amount, timing, and uncertainty of the
,estimates in financials.
•They discuss the basis of presentation such as the fiscal period covered by the statements,
whether IFRS or U.S. GAAP is adhered to, and the inclusion of consolidated entities.
•Provide accounting methods, assumptions, and estimates used by management.
• Business acquisitions or disposals, legal actions, employee benefit plans, contingencies and
commitments, significant customers, related party transactions, position and performance of
segments of the firm, and significant post balance sheet events.
•They are audited along with the primary financial statements.
The five steps in revenue recognition are as follows:
Step 1: Identify the contract or contracts with the customer.
Step 2: Identify the performance obligations in the contract(s).
Step 3: Determine a transaction price.
Step 4: Allocate the transaction price to the performance obligations.
Step 5: Recognize revenue when (or as) the performance obligations have been satisfied.
Straight Line Depreciation
(Cost - Residual Value) / # Useful Years
Double Declining Balance Depreciation
(2/Useful Years) X (Cost - Accumulated depreciation)
Asset depreciated only until it's net book value equals its residual value.
Fixed Asset Turnover
Revenue/Avg Fixed Assets
Avg Fixed Asset = Accumulated Depreciation/Depreciation Expense
Higher = Better
Lower= Using assets inefficiently
Depreciation method impact ratio
Average Age Fixed Asset
Not required to be disclosed but analyst can find:
Accumulated Depreciated/Annual Depreciation
,* Analyst can identify firm older inefficient assets
*Identify need for major capital investment
Total Useful Life
Historical Cost/Annual depreciation
Remaining Useful Life
Net PPE/ Annual Depreciation
OR
Total Useful Life - Avg Age = Remaining Useful Life
OR estimate
CV (cost PPE - accumulated dep) /Annual depreciation
Net Recievables
Amounts owed by customers - allowance doubtful accounts
Interest Coverage Ratio
EBIT/Interest Expense
Receivables Turnover (Active)
Revenue/ Avg. Receivables
Measures operating efficiency -how well firm is managing assets and collecting cash.
High receivables turnover: Could be pulling forward collections by offering large discounts to
pay promptly; or penalties if you pay late
Days Sale Outstanding (Active)
365 / Receivables Turnover
Avg. number of days it takes for customers to pay
Avg credit extended could be 30:
DSO 15 means customers are paying sooner
DSO 45 customers overdue
Inventory Turnover (Active)
, COGS/ Avg. Inventory
High ratio: effective management, lower inventory vs. cost to sell , but if too low could be
missing out on sales
Low ratio: high level inventory could signal obsolete inventory or slow selling
Days Inventory on Hand (Active)
365/ Inventory Turnover
how many days of sales a company can make with its current inventory, similar to how many
days you can survive with the food in your pantry
Payables Turnover (Active)
Purchases/ Avg. trade payables. ( how quickly firm pays suppliers)
Beginning inventory + purchases - ending inventory = COGS
Purchases = End Inventory - Beginning Inventory + COGS
Too high could not be taking advantage of credit terms and paying suppliers too early - or could
be paying suppliers early for a discount
Number of days payable (Active)
365/ Payables Turnover
How long it takes on average to pay off suppliers.
Low: Paying suppliers too quickly, may run into cash flow problems or you have excess of cash
Fixed Asset Turnover (Active)
Revenue/ Avg. Fixed Assets
Higher = Better
Lower= Using assets inefficiently
Depreciation method impact ratio
Finance Lease
