Corporate finance is spread over two study sessions. The subject of corporate finance will likely represent at least 5% (one item set, six questions), but no more than 10% (two item sets, 12 questions) of the Level II exam. It is also possible that corporate finance concepts will be combined with equity and/or financial reporting to comprise about 7-8% of the exam questions.
This week’s study session will attempt to highlight key corporate finance concepts within the parameters of CFAI curriculum. Going beyond simple memorization and base theoretical understanding, candidates must actively apply the concepts in question practicing sessions, as it may not be readily apparent as to how these ideas will manifest themselves in question format.
This material builds upon the corporate finance foundation established in the Level 1 exam. When necessary, students are encouraged to refer to Level 1 curriculum in order refresh necessary cornerstone competencies. These key cornerstones definitely include a firm understanding of net present value (NPV) and internal rate of return (IRR) analysis.
I. Capital Budgeting Decisions
II. Capital Structure for Corporations
III. Dividend and Share Repurchase Policies