The most comprehensive educational resources for finance

Wiley CFA Level II – 11th Hour Guide for 2016

Wiley 11th Hour Guide for 2015 Level II CFA Exam condenses the most important concepts, formulas and questions for readings 1 to 60 into one easy to use volume. It encapsulates the most critical testable information for the reader. A last revision means you cannot scan large volumes of information. The Wiley 11th Hour Guide

CFA Level 2 Summary Notes

If you have started preparing for the CFA Level II exam, you’ve come to the right place. We, at Finance Train, have prepared summary notes for CFA Level 2 exam to help to review the syllabus in a systematic way. In this article, we will talk a little about the CFA Level 2 exam, and

How Not to Fail CFA Level II Exam

There are two reasons why you must be reading this article. One, you’ve just got the news that you have passed CFA Level I exam and are ready for level II, and two, you wrote CFA Level II exam but failed. In either case, this article will provide you some help and tips on how

Mock Exams for CFA Level 1 and 2

With just a few days left for the real exam, Finance Train’s CFA Level 1 and 2 Mock Exams can help you assess your exam preparation and your readiness for the exam. The objective of our mock exam is to simulate the real exam experience so that you are fully equipped and ready to go

Adjusting a Company’s Reported Financial Statements

At the core of financial analysis is the ability of an analyst to revise a company’s reported financial statements in order to create a “true” economic picture of performance and financial positions. In this article, we will look at: Balance Sheet: Common Analyst Adjustments Income Statement: Common Analyst Adjustments Statement of Cash Flows: Common Analyst

Financial Statement Analysis – Ratio Analysis

Financial analysts commonly use financial ratios to evaluate the investment worthiness of a company’s equity or debt.  Ratio analysis is commonly done in comparison to other companies of similar industry. When analyzing financial ratios, the analyst should consider the values in the context of the business cycle, trends, and industry or competitor standards. 5 Ratio

Equity Valuation – Dividend Discount Model

The analyst can use a variety of models to estimate the intrinsic value of equities. One such model is the Dividend Discount Model. Under this model the value of a stock is calculated as the present value of all future dividends from the stock. As you can see in the above video, the general form

Financial Reporting Problems and Warning Signs

The table below summarizes some (i.e. not comprehensive) common financial reporting problems and the warning signs associated with those problems. FINANCIAL STATEMENT ITEM REPORTING PROBLEM WARNING SIGN ANALYTICAL TOOL Revenue Overstated revenue. Large increases in accounts receivable. Look for increases in days sales outstanding (DSO) as this may indicate questionable credit sales by the company.

Analyzing Earnings Quality – the Accruals Ratio

A company’s accrual earnings has two components: cash earnings and aggregate accruals Accrual Basis Earnings = Cash Earnings + Aggregate Accruals Aggregate Accruals = Accrual Basis Earnings – Cash Earnings When aggregate accruals are the dominant component of a company’s earnings, mean reversion tends to occur more quickly and so earnings with a high accrual

Measures of Earnings Quality

Conceptually, earnings quality refers to the accuracy of the income statement reported by a company in predicting future financial performance. The term earnings quality can be extended more broadly by stating financial reporting quality. As the management of a company makes more aggressive assumptions, the quality of its financial statements tends to deteriorate. High quality