CFA Study
Chapter 1.1
r = Real risk-free interest rate + Inflation premium + Default risk premium +
Liquidity premium + Maturity premium
Non-Annual Compounding (Future Value)
Continuous Compounding
Stated and Effective Rates
A Series of Cash Flows – Annuity Formula
Present Value of a Perpetuity
,INTRODUCTION TO FINANCIAL
STATEMENT ANALYSIS
STATEMENT OF COMPREHENSIVE INCOME
The statement of comprehensive income can be presented as a single statement of
comprehensive income or as two statements, an income statement and a statement of
comprehensive income that begins with profit or loss from the income statement. The
Volkswagen Group chose the latter form of presentation.
Income Statement
The income statement presents information on the financial performance of a
company’s business activities over a period of time.
Other Comprehensive Income
Comprehensive income includes all items that impact owners’ equity but are not the
result of transactions with shareowners. Some of these items are included in the
calculation of net income, and some are included in other comprehensive income
(OCI). When comprehensive income is presented in two statements, the statement
of comprehensive income begins with the profit or loss from the income statement
and then presents the components of OCI.
STATEMENT OF CHANGES IN EQUITY AND CASH
FLOW STATEMENT
,FINANCIAL NOTES, SUPPLEMENTARY
SCHEDULES, AND MANAGEMENT COMMENTARY
The notes (also sometimes referred to as footnotes) that accompany the four
financial statements are required and are an integral part of the complete set of
financial statements. The notes provide information that is essential to understanding
the information provided in the primary statements. Volkswagen’s 2017 financial
statements, for example, include more than 100 pages of notes.
The notes disclose the basis of preparation for the financial statements
Management Commentary or Management’s Discussion and
Analysis
Publicly held companies typically include a section in their annual reports where
management discusses a variety of issues, including the nature of the business, past
results, and future outlook. This section is referred to by a variety of names, including
management report(ing), management commentary, operating and financial review,
and management’s discussion and analysis.
, FINANCIAL STATEMENT ANALYSIS FRAMEWORK
ACCOUNTING STANDARDS BOARDS
In other words, generally, standard-setting bodies set the standards and regulatory
authorities recognise and enforce the standards. Without the recognition of the standards by
the regulatory authorities, the private sector standard-setting bodies would have no authority.
Note, however, that regulators often retain the legal authority to establish financial reporting
standards in their jurisdiction and can overrule the private sector standard-setting bodies.
Chapter 1.1
r = Real risk-free interest rate + Inflation premium + Default risk premium +
Liquidity premium + Maturity premium
Non-Annual Compounding (Future Value)
Continuous Compounding
Stated and Effective Rates
A Series of Cash Flows – Annuity Formula
Present Value of a Perpetuity
,INTRODUCTION TO FINANCIAL
STATEMENT ANALYSIS
STATEMENT OF COMPREHENSIVE INCOME
The statement of comprehensive income can be presented as a single statement of
comprehensive income or as two statements, an income statement and a statement of
comprehensive income that begins with profit or loss from the income statement. The
Volkswagen Group chose the latter form of presentation.
Income Statement
The income statement presents information on the financial performance of a
company’s business activities over a period of time.
Other Comprehensive Income
Comprehensive income includes all items that impact owners’ equity but are not the
result of transactions with shareowners. Some of these items are included in the
calculation of net income, and some are included in other comprehensive income
(OCI). When comprehensive income is presented in two statements, the statement
of comprehensive income begins with the profit or loss from the income statement
and then presents the components of OCI.
STATEMENT OF CHANGES IN EQUITY AND CASH
FLOW STATEMENT
,FINANCIAL NOTES, SUPPLEMENTARY
SCHEDULES, AND MANAGEMENT COMMENTARY
The notes (also sometimes referred to as footnotes) that accompany the four
financial statements are required and are an integral part of the complete set of
financial statements. The notes provide information that is essential to understanding
the information provided in the primary statements. Volkswagen’s 2017 financial
statements, for example, include more than 100 pages of notes.
The notes disclose the basis of preparation for the financial statements
Management Commentary or Management’s Discussion and
Analysis
Publicly held companies typically include a section in their annual reports where
management discusses a variety of issues, including the nature of the business, past
results, and future outlook. This section is referred to by a variety of names, including
management report(ing), management commentary, operating and financial review,
and management’s discussion and analysis.
, FINANCIAL STATEMENT ANALYSIS FRAMEWORK
ACCOUNTING STANDARDS BOARDS
In other words, generally, standard-setting bodies set the standards and regulatory
authorities recognise and enforce the standards. Without the recognition of the standards by
the regulatory authorities, the private sector standard-setting bodies would have no authority.
Note, however, that regulators often retain the legal authority to establish financial reporting
standards in their jurisdiction and can overrule the private sector standard-setting bodies.
