CFA Level 1 Subjects

CFA Level 1 Subjects

 

Every CFA level marks a significant step forward on the road to becoming a CFA Charterholder holder. Understand that completing the certification program and earning the CFA Charter helps verify the financial knowledge, expertise, and capacity of professionals while also demonstrating their capacity to operate patiently and make determined and quite well efforts to achieve excellence in the arena of their professional pursuit. For the purposes of this post, we will concentrate on the CFA Level I Examination, which is the first and most essential step in obtaining the CFA Charter.

 

CFA® Level I Exam structure

Its candidates are equipped with unequaled financial and investing skills and knowledge as a result of their CFA exam preparation. The Level 1 CFA exam is designed to assist candidates in gaining basic knowledge and comprehension of the principles that are used in the financial and investment sectors. The Level 1 CFA exam is available online. Level 1 of the CFA examination consists of 240 independent MCQs, which are split into 2 sets of 120 questions each. During the three-hour morning session, one set of questions is taken, and the second set of questions is taken during the three-hour evening session, with a 15-minute lunch break between those. Please keep in mind that all of these questions hold the same amount of importance.

 

Subject Areas

The level 1 CFA exam has 10 subject areas:

 

1. Ethics and Professional Standards

2. Financial Reporting and Analysis

3. Corporate Finance

4. Quantitative methods

5. Economics

6. Portfolio Management

7. Equity Investments

8. Fixed Income

9. Derivatives

10. Alternative Investments

Below is a detailed summary of the level 1 CFA exam subject areas:

 

Ethics and Professional Standards

Global Investment Professional Standards (GIPS), which are a significant portion of the ethical element relevant to the financial sector, are covered in this topic. It is one of the most essential topics of study in the CFA programme since the certification programme is committed to the promotion of universal professional ethics across the organisation. There are clear indications of this in topic weighting, with ethics being one issue that gets relative weighting across all three CFA Levels.

 

Financial Reporting and Analysis

This topic area is assessed more heavily in the level 1 exam, with a higher proportion of questions coming from it. To develop a strong foundation, it is critical to thoroughly comprehend Financial Reporting and Analysis at the level 2 level. Level 2 Financial Reporting and Analysis expands on the principles gained in level 1 Financial Reporting and Analysis. It provides candidates with knowledge and abilities in the areas of financial reports, taxation, inventories analysis, recognition of revenue, and long-term investments, among other things. In recognition of the exam's worldwide character, it does not test on accounting concepts that are locally accepted; rather, it concentrates on accounting principles and rules that are universally recognized, such as the International Financial Reporting Standards (IFRS).

 

Corporate Finance

With just a 7 percent weighting, this segment has a relatively restricted reach in terms of content. It covers topics such as capital planning, net present value internal rate of return, cost of capital, measures of leverage, the fundamentals of dividends and share buybacks, as well as working capital management and corporate governance of publicly traded firms. Aspects of the agency-principal relationship that are addressed include difficulties with agency representation.

 

Quantitative methods

It is the goal of this part to introduce you to quantitative analysis and mathematically-oriented ways to addressing complicated financial difficulties, both of which are very valuable knowledge areas. This part covers some of the most significant topics in business, such as performance assessment, the time value of money, statistics and probability fundamentals, sampling and hypothesis testing, as well as correlation and linear regression analysis in Microsoft Excel. These topics, when studied in-depth, give valuable tools and approaches for understanding fixed income, stocks, and portfolio management. Furthermore, a thorough understanding and comprehension of quantitative approaches will be beneficial in mastering a significant percentage of the CFA body of knowledge.

 

Economics

Due to the fact that most macroeconomic ideas are best taught visually, students with an economics background and proficiency in drawing and understanding graphs will do well on this exam. Fundamental topics in microeconomics and macroeconomics are tested in this course.

 

Portfolio Management

This section discusses the underlying principles of portfolio management and presents several major ideas, such as the Theory of Modern Portfolios and the Capital Asset Pricing Model, that are important to understand. A mere 7 percent of the test is devoted to this section, which equates to around 17 questions in total. This portion, however, becomes more important in Level II and Level III of the CFA programme, as the emphasis turns from acquiring information to applying it for effective portfolio management.

 

Equity Investments

The topic area instills in students the ability to appraise and analyze a firm by instructing them on how to utilize techniques such as performance-based financing and financial modeling (PBF). It also includes information on equities markets and financial products.

 

Fixed Income

This section discusses fixed income markets and instruments, as well as the methodologies used to price them. Important topics, including yield measurements, duration, and convexity, are explored in this chapter. This part is organized as follows: first, it discusses bond analysis and valuation, next it discusses the bond's characteristics, and lastly, it discusses ten hazards associated with debt investments. This component has a weighting of 10% on the final test.

 

Derivatives

Level 1 exposes a candidate to the fundamental principles of derivatives, topics that will be utilized in more depth in levels 2 and 3 of the course. Level 1 exams include the fundamentals of futures, exchanges, forwards, and options, as well as how to hedge with these instruments.

 

Alternative Investments

This part contains information on investment types that are not covered by the other knowledge areas of the CFA. Real estate funds, venture capital funds, hedge funds, and commodity funds are all included. Because there will be a particular emphasis on commodities, it would be beneficial for participants to have a thorough understanding of the principles associated with commodity trading. In this part, there might be seven or eight theoretically focused questions, with some of them being directly connected to commodities or commodities-related concepts. Despite the fact that this component has a low weighting in CFA Level I, a considerable amount of work might be put forward to master these areas with relative ease.

 

Level I CFA® Subjects weightage

Level I CFA® subjects has a different weightage in the exams as given below:

Full Time Level I CFA® Topics	Full Time Level I CFA® topic Weightage
Ethical and Professional Standards	15-20%
Quantitative Methods	8–12%
Economics	8–12%
Financial Reporting and Analysis	13-17%
Corporate Finance	8–12%
Portfolio Management and Wealth Management	5-8%
Equity Investments	10-12%
Fixed Income	10-12%
Derivative Investments	5-8%
Alternative Investments	5-8%
Total	100%

 

Conclusion

 

The CFA® Level I test is not for the faint of heart or those who are just mildly interested in the field of finance. It is intended for those who are currently employed in the financial industry and have a substantial level of knowledge in a certain subject who want to further expand their experience, professional skills, and competencies in order to enhance their careers. While it is not impossible to complete the test, participants must be aware that the results may be less than positive if they do not put out a concerted and focused effort. On the plus side, passing the CFA Level I test opens the door to a plethora of new professional development prospects. It broadens the range of information and abilities available to any financial practitioner. They may then set their eyes on obtaining the highly sought-after CFA Charter and give their entire foot forward to achieve their goal.