General Guide for CFA level 1 Exam
Ethical behavior
1. Unethical behavior raises perceived risk → raises a firm's cost of capital.
2. Must disclose BOTH the share ownership and the prospective consulting work — in the report itself.
3. Broad duty: act with competence, integrity, and ethically toward all market participants.
4. LEAST LIKELY permitted: sharing with head of equity investments — this could lead to trading on confidential info.
5. Schute violated the Standard because he failed to take steps to prevent the leak (close door, mute call).
6. Client offer free trip - Must inform employer in writing AND receive written consent before accepting.
FSA/FRA:
1. MATCHING PRINCIPLE = expenses recognized in same period as the revenue they helped generate.
2. Material GAAP departure but statements otherwise fair → Qualified opinion.
Corporate Finance:
1. Mature firms have stable, predictable cash flows → can support heavy use of debt financing.
2. Poison pill is a defense tool used BY the target company against activists — not something the activist would use.
3. Sell marketable securities = primary liquidity source, no negative signal.
4. Private firms have high barriers to ownership transfer (illiquid, no public market).
Economics:
1. Contractionary pairing: SELL government securities (shrink money supply) + increase policy rate.
2. World Bank's core mission = growth & poverty reduction using financial + technical assistance.
1. Unethical behavior raises perceived risk → raises a firm's cost of capital.
2. Must disclose BOTH the share ownership and the prospective consulting work — in the report itself.
3. Broad duty: act with competence, integrity, and ethically toward all market participants.
4. LEAST LIKELY permitted: sharing with head of equity investments — this could lead to trading on confidential info.
5. Schute violated the Standard because he failed to take steps to prevent the leak (close door, mute call).
6. Client offer free trip - Must inform employer in writing AND receive written consent before accepting.
FSA/FRA:
1. MATCHING PRINCIPLE = expenses recognized in same period as the revenue they helped generate.
2. Material GAAP departure but statements otherwise fair → Qualified opinion.
Corporate Finance:
1. Mature firms have stable, predictable cash flows → can support heavy use of debt financing.
2. Poison pill is a defense tool used BY the target company against activists — not something the activist would use.
3. Sell marketable securities = primary liquidity source, no negative signal.
4. Private firms have high barriers to ownership transfer (illiquid, no public market).
Economics:
1. Contractionary pairing: SELL government securities (shrink money supply) + increase policy rate.
2. World Bank's core mission = growth & poverty reduction using financial + technical assistance.