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.