Reading 64 – Introduction to the Valuation of Debt Securities = 57%
Although there weren’t many questions in this reading it was a good wake up call that you can’t think just being able to plug a FV, PMT, I/Y, N and CPT PV is good enough to get through this reading.
E.g. Future value = Par + Coupons + Interest on Coupons.
E.g. Use of individual spot rates to calculate the price of a bond manually.
Reading 65 – Yield Measures, Spot Rates, and Forward Rates = 71%
Again, despite previous knowledge in Fixed Income this required constant review in my Schweser materials, e.g. calculating current yield, cash flow yield, yield to call, yield to put, yield to worse, etc. It was also a good reminder not to get too excited when calculating YTM from a semi-annual bond where a BEY is required, and make no mistake that the answer before x2 will be their as a potential answer.
To make up for a disappointing weekend I have planned to use the forthcoming
Easter break to get some serious study under my belt + I’ve added on Tuesday and Wednesday next week from my annual leave to give myself a good 6 days worth of study.
Monday 29 March 2010
Entry 4 – The time constraints of studying for CFA®
Over the past week I have almost finished watching the Study Session 16 (Fixed Income Analysis and Valuation) classroom recordings on my iPhone. I haven’t had the most impressive week of CFA study to be honest, which I think nicely highlights the challenges in time management that need to be overcome on a consistent basis in order to pass the exam.
I had squash matches in the evening last week on Monday, Tuesday and Friday (unfortunately) so I diarised Wednesday and Thursday nights to stay at work from 6pm – 8pm.
Wednesday for some reason I felt knackered so naively thought I’d go home and do some question practice on my laptop in front of the TV hoping Spurs would lose. I was wrong on both accounts.
Thursday was meant to be much more fruitful and I planned to stay studying until 8pm. However, I found out earlier that day that I’d been given a large project at work so spent until gone 7pm discussing that. More lost study hours!
The weekend also proved a struggle and I found it difficult to fit my allocated study in around various social items and family commitments. Things started well on Saturday morning but then deteriorated throughout the afternoon – however I did manage to get in 30 minutes before playing squash that evening. This combined with losing an hour from the clocks going forward on Sunday meant that I didn’t spend as much time studying as I had hoped. I think this highlights how difficult it can be sometimes to prioritise and incorporate study into your every day life and re affirms just how committed you have to be to undertake this qualification.
I had squash matches in the evening last week on Monday, Tuesday and Friday (unfortunately) so I diarised Wednesday and Thursday nights to stay at work from 6pm – 8pm.
Wednesday for some reason I felt knackered so naively thought I’d go home and do some question practice on my laptop in front of the TV hoping Spurs would lose. I was wrong on both accounts.
Thursday was meant to be much more fruitful and I planned to stay studying until 8pm. However, I found out earlier that day that I’d been given a large project at work so spent until gone 7pm discussing that. More lost study hours!
The weekend also proved a struggle and I found it difficult to fit my allocated study in around various social items and family commitments. Things started well on Saturday morning but then deteriorated throughout the afternoon – however I did manage to get in 30 minutes before playing squash that evening. This combined with losing an hour from the clocks going forward on Sunday meant that I didn’t spend as much time studying as I had hoped. I think this highlights how difficult it can be sometimes to prioritise and incorporate study into your every day life and re affirms just how committed you have to be to undertake this qualification.
Entry 3 - Week 4 of study - Start of applications within financial statement analysis
Study session 9
Reading 36: Inventories
I’ve found study session 9 probably the most challenging as this is where the more detailed materials exists within Financial Statements and Analysis.
Rather than just memorising the formula, I was able to obtain a good background and logical understanding of LIFO to FIFO comparisons. I used the study texts and help from the 7city tutor faculty to get to grips with this area.
Reading 36: Inventories
I’ve found study session 9 probably the most challenging as this is where the more detailed materials exists within Financial Statements and Analysis.
Rather than just memorising the formula, I was able to obtain a good background and logical understanding of LIFO to FIFO comparisons. I used the study texts and help from the 7city tutor faculty to get to grips with this area.
Entry 2 – weeks 2 & 3 - Financial statements & important concepts
Study session 8
Reading 32: Understanding the Income Statement = 72%
Earnings per Share is the main topic covered in this reading. Overall I coped will with this subject matter. However I did need some clarification that prior year arrears of cumulative preference dividends are not relevant to the computation of the current EPS.
The question based approach identified that I struggled with the concept surrounding special cases of revenue recognition and mapping the features of each to each method. With 7city’s help I constructed (as part of my study session study summary) a matrix/flow diagram that captures the whole concept nicely.
Reading 33: Understanding the Balance Sheet = 72%
I put together my own summary table detailing how realised and unrealised gains of trading securities, assets held for sale, and assets held until maturity, should be reflected in Shareholders Equity.
Reading 34: Understanding the Cash Flow statement = 62%
Question practice identified that calculating dividends paid from Retained Earnings balances, Dividend Payout and net income refined.
Confusion between direct and indirect methods aided by treating everything as the indirect method and filling the gaps for NI or CFO, respectively.
Lastly, one of the key concepts I couldn’t grasp was rectified by using the tutor helpdesk. I was confused about things like wages vs. wages payable and why sometimes they were included in cash flow reconciliations and sometimes not. The key here, as explained to me, was identifying what was a balance sheet figure and what was an income statement figure, and how that related to the cash flow statement.
Reading 35: Financial Analysis Techniques = 82%
Following confusion with the cash conversion cycle, I used the tutor helpdesk and the phrase R.I.P (rest in peace) and letters S.C.C. to help to me remember the cash conversion cycle formula and the formulae for its components.
R + I – P = Receivables + Inventory – Payables
S. C. C. = Use the sales figure for receivables, the COGS for Inventory, and the COGS for Payables. S.C.C conveniently stands for Southgate Cricket Club, where I used to play cricket.
Hurdle Test #2 = 80%
As a first attempt, I was quite pleased with this, given the difficulty of the ‘accounts’ topics. The tutor helpdesk helped clarify that an exception to applicable accounting principles is not as severe as first thought, it means a slight departure from the code, so an auditor would issue a qualified opinion.
There were also a couple of cash flow reconciliation confusions stemming from what constitutes a balance sheet figure and what is an income statement figure.
Workshop #1 = 89%
I find the workshops provided by 7city particularly useful. It’s an evening session, (also posted online and recorded), whereby there are 18 exam style questions, you have 1.5 minutes per question, so 27minutes to complete, then there is 1.5 hours of debrief. Rather than go through each question monotonously, the topic is picked up from the question, a brief summary of knowledge set required in this area is discussed, and then related back to how you answer that particular question. Workshop #1 covers study sessions 2, 7 and 8. There will be 6 of these over the ‘tuition period’ and act as 6 ongoing mini revision sessions.
Reading 32: Understanding the Income Statement = 72%
Earnings per Share is the main topic covered in this reading. Overall I coped will with this subject matter. However I did need some clarification that prior year arrears of cumulative preference dividends are not relevant to the computation of the current EPS.
The question based approach identified that I struggled with the concept surrounding special cases of revenue recognition and mapping the features of each to each method. With 7city’s help I constructed (as part of my study session study summary) a matrix/flow diagram that captures the whole concept nicely.
Reading 33: Understanding the Balance Sheet = 72%
I put together my own summary table detailing how realised and unrealised gains of trading securities, assets held for sale, and assets held until maturity, should be reflected in Shareholders Equity.
Reading 34: Understanding the Cash Flow statement = 62%
Question practice identified that calculating dividends paid from Retained Earnings balances, Dividend Payout and net income refined.
Confusion between direct and indirect methods aided by treating everything as the indirect method and filling the gaps for NI or CFO, respectively.
Lastly, one of the key concepts I couldn’t grasp was rectified by using the tutor helpdesk. I was confused about things like wages vs. wages payable and why sometimes they were included in cash flow reconciliations and sometimes not. The key here, as explained to me, was identifying what was a balance sheet figure and what was an income statement figure, and how that related to the cash flow statement.
Reading 35: Financial Analysis Techniques = 82%
Following confusion with the cash conversion cycle, I used the tutor helpdesk and the phrase R.I.P (rest in peace) and letters S.C.C. to help to me remember the cash conversion cycle formula and the formulae for its components.
R + I – P = Receivables + Inventory – Payables
S. C. C. = Use the sales figure for receivables, the COGS for Inventory, and the COGS for Payables. S.C.C conveniently stands for Southgate Cricket Club, where I used to play cricket.
Hurdle Test #2 = 80%
As a first attempt, I was quite pleased with this, given the difficulty of the ‘accounts’ topics. The tutor helpdesk helped clarify that an exception to applicable accounting principles is not as severe as first thought, it means a slight departure from the code, so an auditor would issue a qualified opinion.
There were also a couple of cash flow reconciliation confusions stemming from what constitutes a balance sheet figure and what is an income statement figure.
Workshop #1 = 89%
I find the workshops provided by 7city particularly useful. It’s an evening session, (also posted online and recorded), whereby there are 18 exam style questions, you have 1.5 minutes per question, so 27minutes to complete, then there is 1.5 hours of debrief. Rather than go through each question monotonously, the topic is picked up from the question, a brief summary of knowledge set required in this area is discussed, and then related back to how you answer that particular question. Workshop #1 covers study sessions 2, 7 and 8. There will be 6 of these over the ‘tuition period’ and act as 6 ongoing mini revision sessions.
Entry 1 – First week of study (first part quants and fin statements)
My first entry will a bit of a long one as I started studying in February, but the aim of it is to provide you with an update on my study progress up until today.
As a rough weekly study plan I have been watching MP4 videos of the classroom courses delivered by 7city on my iPhone during my commute into and out of work,(I have said goodbye to the Metro!) which amounts to about 5 hours of ‘virtual’ classroom per week.
I have then been diarising a couple of weeks in advance two weeknights per week where I stay 6pm – 8pm after work to do self study in the form of question practice and reading. I also aim to find 8 hours of doing likewise each weekend. This is not always split 4 hours Saturday and 4 hours Sunday, as I might be working it around when the Arsenal are playing. But a couple of things I’ve had to change is turn down that extra beer on a Friday/Saturday night and going ‘out out’ to ensure I’m up at a similar time on a Saturday/Sunday morning, as I am on a weekday morning for work. When/(if!) this is done successfully, 4 hours a day is not that hard to find.
The study approach that 7city adopt is not in study session ascending order, e.g. study session 1, study session 2, study session 3, …. , study session 18.
The first study session to tackle is study session 2, as it is the first part of quantitative methods. I guess the rationale here is the benefit of ensuring that a candidate has a grasp of basic time value of money and statistical skills, which will be required on an ongoing basis. Given my Economics degree and my completion of the Investment Management Certificate, (IMC) I decided to go straight into the online questions for each of the 4 readings, and use this as a barometer to identify any knowledge gaps, and correspondingly address them.
Study session 2
Reading 05: The Time Value of Money – First attempt = 87%
Mastering the use of the Time Value of Money (TVM) calculator functions is key here.
Whilst attempting the questions I copied certain questions which I was unsure of into a word document as I was going through the test, and did the same for those I got wrong. This enabled me to then use the 7city tutor faculty for help in addressing my understanding through the helpdesk. A few key things:
Perpetuity when cash flows are received at end of the month, and a perpetuity when cash flows are received at the start of the month. Through the tutor helpdesk I realised the importance of not getting too mechanical with the END and BGN functions on the Texas Calculator, which is what you might do for an ordinary annuity and an annuity due. The formula for a perpetuity is simple at PV = PMT / r. So I learnt to remember to add on an additional payment for the perpetuity when cash flows are received at the beginning of the month.
Providing interest due or balance outstanding on loans in certain periods was identified as a weak area. This was corrected by the helpdesk, as was my confusion between geometric mean coming from various return figures and a holding period return coming from absolute numbers.
It is proving really helpful to be able to contact my tutors outside of the classroom especially when things like this come up, as it means I don’t hold up my study.
Reading 06: Discounted Cash Flow Applications = 100%
Good reminder of logic and scale of return behind BDY, HPR, EAY, MMY and BEY.
Reading 07: Statistical Concepts and Market Returns = 95%
Harmonic mean –This question made me realise I needed to clarify the logic and purpose and how this corresponds to the arithmetic and geometric means – I am back on the tutor helpdesk for this.
Chebyshev’s inequality – question helped remind me of calculation and tutor helpdesk clarified its purpose.
Reading 08: Probability Concepts = 93%
Clarity on what the phrase ‘no units’ meant within the correlation coefficient, i.e. it’s number between -1 and +1 but it’s not a unit as in a percentage.
The use of drawing tree diagrams for Bayes Theorem questions
Hurdle Test #1 = 90%
As part of the 7city study planner they provide me with a series of more challenging ‘20 question’ hurdle tests. These are scheduled after key parts of the syllabus and they only record your first attempt. They include specified completion dates to highlight when you should have completed these by.
This was a pleasing confirmation of a good understanding of the previous 4 readings within study session 2. The mistakes were silly errors on my part and it has allowed me to reflect and draw on these.
Study session 7
Referring back to the topic coverage order that 7city adopt, the next big topic area is ‘Financial Statements and Analysis’. The rationale explained for addressing this topic next (and therefore early) is that they’ve been historically the toughest study sessions. This is very true for me as I have never done any form of accounting before.
Reading 29: Financial Statement Analysis: An introduction = 78%
By practising questions and seeking advice from the tutors I have learnt that Statement of Stockholders’ Equity and the Statement of Comprehensive Income is sort of the same thing. I was also able to flag that I have trouble with categorising audit opinions, allowing me to remedy this through further study.
Reading 30: Financial Reporting Mechanics = 69%
Both the helpdesk and a question-based approach helped me to realise that I shouldn’t think too logically about cash flow categorisation under US GAAP – just learn it! It also helped me categorically realise that unless there actually is a movement of cash, then it is not recorded on the cash flow statement. E.g. a straight exchange of a fixed asset.
Reading 31: Financial Reporting Standards = 86%
The difference between ‘deemed’ authoritative and ‘designated’ authoritative clarified.
As a rough weekly study plan I have been watching MP4 videos of the classroom courses delivered by 7city on my iPhone during my commute into and out of work,(I have said goodbye to the Metro!) which amounts to about 5 hours of ‘virtual’ classroom per week.
I have then been diarising a couple of weeks in advance two weeknights per week where I stay 6pm – 8pm after work to do self study in the form of question practice and reading. I also aim to find 8 hours of doing likewise each weekend. This is not always split 4 hours Saturday and 4 hours Sunday, as I might be working it around when the Arsenal are playing. But a couple of things I’ve had to change is turn down that extra beer on a Friday/Saturday night and going ‘out out’ to ensure I’m up at a similar time on a Saturday/Sunday morning, as I am on a weekday morning for work. When/(if!) this is done successfully, 4 hours a day is not that hard to find.
The study approach that 7city adopt is not in study session ascending order, e.g. study session 1, study session 2, study session 3, …. , study session 18.
The first study session to tackle is study session 2, as it is the first part of quantitative methods. I guess the rationale here is the benefit of ensuring that a candidate has a grasp of basic time value of money and statistical skills, which will be required on an ongoing basis. Given my Economics degree and my completion of the Investment Management Certificate, (IMC) I decided to go straight into the online questions for each of the 4 readings, and use this as a barometer to identify any knowledge gaps, and correspondingly address them.
Study session 2
Reading 05: The Time Value of Money – First attempt = 87%
Mastering the use of the Time Value of Money (TVM) calculator functions is key here.
Whilst attempting the questions I copied certain questions which I was unsure of into a word document as I was going through the test, and did the same for those I got wrong. This enabled me to then use the 7city tutor faculty for help in addressing my understanding through the helpdesk. A few key things:
Perpetuity when cash flows are received at end of the month, and a perpetuity when cash flows are received at the start of the month. Through the tutor helpdesk I realised the importance of not getting too mechanical with the END and BGN functions on the Texas Calculator, which is what you might do for an ordinary annuity and an annuity due. The formula for a perpetuity is simple at PV = PMT / r. So I learnt to remember to add on an additional payment for the perpetuity when cash flows are received at the beginning of the month.
Providing interest due or balance outstanding on loans in certain periods was identified as a weak area. This was corrected by the helpdesk, as was my confusion between geometric mean coming from various return figures and a holding period return coming from absolute numbers.
It is proving really helpful to be able to contact my tutors outside of the classroom especially when things like this come up, as it means I don’t hold up my study.
Reading 06: Discounted Cash Flow Applications = 100%
Good reminder of logic and scale of return behind BDY, HPR, EAY, MMY and BEY.
Reading 07: Statistical Concepts and Market Returns = 95%
Harmonic mean –This question made me realise I needed to clarify the logic and purpose and how this corresponds to the arithmetic and geometric means – I am back on the tutor helpdesk for this.
Chebyshev’s inequality – question helped remind me of calculation and tutor helpdesk clarified its purpose.
Reading 08: Probability Concepts = 93%
Clarity on what the phrase ‘no units’ meant within the correlation coefficient, i.e. it’s number between -1 and +1 but it’s not a unit as in a percentage.
The use of drawing tree diagrams for Bayes Theorem questions
Hurdle Test #1 = 90%
As part of the 7city study planner they provide me with a series of more challenging ‘20 question’ hurdle tests. These are scheduled after key parts of the syllabus and they only record your first attempt. They include specified completion dates to highlight when you should have completed these by.
This was a pleasing confirmation of a good understanding of the previous 4 readings within study session 2. The mistakes were silly errors on my part and it has allowed me to reflect and draw on these.
Study session 7
Referring back to the topic coverage order that 7city adopt, the next big topic area is ‘Financial Statements and Analysis’. The rationale explained for addressing this topic next (and therefore early) is that they’ve been historically the toughest study sessions. This is very true for me as I have never done any form of accounting before.
Reading 29: Financial Statement Analysis: An introduction = 78%
By practising questions and seeking advice from the tutors I have learnt that Statement of Stockholders’ Equity and the Statement of Comprehensive Income is sort of the same thing. I was also able to flag that I have trouble with categorising audit opinions, allowing me to remedy this through further study.
Reading 30: Financial Reporting Mechanics = 69%
Both the helpdesk and a question-based approach helped me to realise that I shouldn’t think too logically about cash flow categorisation under US GAAP – just learn it! It also helped me categorically realise that unless there actually is a movement of cash, then it is not recorded on the cash flow statement. E.g. a straight exchange of a fixed asset.
Reading 31: Financial Reporting Standards = 86%
The difference between ‘deemed’ authoritative and ‘designated’ authoritative clarified.
Tuesday 16 March 2010
Why I'm studying CFA Level 1
Hello my name is Stuart Empson and I’d like to introduce my CFA® Level I study blog, towards the June 2010 exam.
I work for 7city Learning as a Business Development Manager. 7city are a global financial training company and part of my decision for studying the CFA Program is to help me to provide better consultative advice to my clients, by obtaining the broad body of financial markets knowledge the CFA Program demands.
I have been studying for a couple of months now, but nevertheless I wanted to start this blog to see if it can provide a useful, first-hand insight into how I’m trying to ‘beat’ that 34% global pass rate. I also wanted to share the technical challenges of the material I’ll be facing, the amount of study hours I’m having to put in each week, and the methods I’m using within those study hours to overcome the challenges faced.
I hope you enjoy reading my blog and it proves a useful experience in either helping to decide whether or not to take the CFA Program, or if you are also going through the misery – it is perhaps a good way to share study approaches with you that are working for me.
I work for 7city Learning as a Business Development Manager. 7city are a global financial training company and part of my decision for studying the CFA Program is to help me to provide better consultative advice to my clients, by obtaining the broad body of financial markets knowledge the CFA Program demands.
I have been studying for a couple of months now, but nevertheless I wanted to start this blog to see if it can provide a useful, first-hand insight into how I’m trying to ‘beat’ that 34% global pass rate. I also wanted to share the technical challenges of the material I’ll be facing, the amount of study hours I’m having to put in each week, and the methods I’m using within those study hours to overcome the challenges faced.
I hope you enjoy reading my blog and it proves a useful experience in either helping to decide whether or not to take the CFA Program, or if you are also going through the misery – it is perhaps a good way to share study approaches with you that are working for me.
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