2024 CFA© Program Curriculum Level I Volume 2 Portfolio Management, Corporate Issuers, Financial Statement Analysis

How to Use the CFA Program Curriculum
	Errata
		Designing Your Personal Study Program
		CFA Institute Learning Ecosystem (LES)
		Feedback
Portfolio Management
	Learning Module 1	Portfolio Risk and Return: Part I
		Introduction
		Historical Return and Risk
			Nominal Returns of Major US Asset Classes
			Real Returns of Major US Asset Classes
			Nominal and Real Returns of Asset Classes in Major Countries
			Risk of Major Asset Classes
			Risk–Return Trade-off
		Other Investment Characteristics
			Distributional Characteristics
			Market Characteristics
		Risk Aversion and Portfolio Selection
			The Concept of Risk Aversion
		Utility Theory and Indifference Curves
			Indifference Curves
		Application of Utility Theory to Portfolio Selection
		Portfolio Risk & Portfolio of Two Risky Assets
			Portfolio of Two Risky Assets
		Portfolio of Many Risky Assets
			Importance of Correlation in a Portfolio of Many Assets
		The Power of Diversification
			Correlation and Risk Diversification
			Historical Risk and Correlation
			Historical Correlation among Asset Classes
			Avenues for Diversification
		Efficient Frontier: Investment Opportunity Set & Minimum Variance Portfolios
			Investment Opportunity Set
			Minimum-Variance Portfolios
		Efficient Frontier: A Risk-Free Asset and Many Risky Assets
			Capital Allocation Line and Optimal Risky Portfolio
			The Two-Fund Separation Theorem
		Efficient Frontier: Optimal Investor Portfolio
			Investor Preferences and Optimal Portfolios
		Summary
		Practice Problems
		Solutions
	Learning Module 2	Portfolio Risk and Return: Part II
		Introduction
		Capital Market Theory: Risk-Free and Risky Assets
			Portfolio of Risk-Free and Risky Assets
		Capital Market Theory: The Capital Market Line
			Passive and Active Portfolios
			What Is the “Market”?
			The Capital Market Line (CML)
		Capital Market Theory: CML - Leveraged Portfolios
			Leveraged Portfolios with Different Lending and Borrowing Rates
		Systematic and Nonsystematic Risk
			Systematic Risk and Nonsystematic Risk
		Return Generating Models
			Return-Generating Models
			Decomposition of Total Risk for a Single-Index Model
			Return-Generating Models: The Market Model
		Calculation and Interpretation of Beta
			Estimation of Beta
			Beta and Expected Return
		Capital Asset Pricing Model: Assumptions and the Security Market Line
			Assumptions of the CAPM
			The Security Market Line
		Capital Asset Pricing Model: Applications
			Estimate of Expected Return
		Beyond CAPM: Limitations and Extensions of CAPM
			Limitations of the CAPM
			Extensions to the CAPM
		Portfolio Performance Appraisal Measures
			The Sharpe Ratio
			The Treynor Ratio
			M2: Risk-Adjusted Performance (RAP)
			Jensen’s Alpha
		Applications of the CAPM in Portfolio Construction
			Security Characteristic Line
			Security Selection
			Implications of the CAPM for Portfolio Construction
		Summary
		References
		Practice Problems
		Solutions
Corporate Issuers
	Learning Module 1	Organizational Forms, Corporate Issuer Features, and Ownership
		Introduction
		Organizational Forms of Businesses
			Organizational Forms of Businesses
			Sole Trader or Proprietorship
			Partnerships
			Limited Companies
		Key Features of Corporate Issuers
			Legal Identity
			Owner–Manager Separation
			Owner/Shareholder Liability
			External Financing
			Taxation
		Publicly vs. Privately Owned Corporate Issuers
			Exchange Listing, Liquidity, and Price Transparency
			Share Issuance
			Registration and Disclosure Requirements
			Going from Private to Public 
			Going from Public to Private
			The Varieties of Corporate Owners
		Practice Problems
		Solutions
	Learning Module 2	Investors and Other Stakeholders
		Introduction
		Financial Claims of Lenders and Shareholders
			Debt Versus Equity
			Debt Versus Equity: Risk and Return
			Conflicts of Interest among Lenders and Shareholders
		Corporate Stakeholders and Governance
			Shareholders versus Stakeholders
			Investors
			Board of Directors
			Managers
			Employees
			Customers
			Suppliers
			Governments
		Corporate ESG Considerations
			Environmental Factors
			Social Factors
			Governance Factors
			Evaluating ESG-Related Risks and Opportunities
		Practice Problems
		Solutions
	Learning Module 3	Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits
		Introduction
		Stakeholder Conflicts and Management
			Shareholder, Board Director, and Manager Relationships
			Controlling and Minority Shareholder Relationships
			Shareholder versus Creditor Interests
		Corporate Governance Mechanisms
			Corporate Reporting and Transparency
			Shareholder Mechanisms
			Creditor Mechanisms
			Board and Management Mechanisms
			Employee Mechanisms
			Customer and Supplier Mechanisms
			Government Mechanisms
		Corporate Governance Risks and Benefits
			Operational Risks and Benefits
			Legal, Regulatory, and Reputational Risks and Benefits
			Financial Risks and Benefits
		Practice Problems
		Solutions
	Learning Module 4	Working Capital and Liquidity
		Introduction
		Cash Conversion Cycle
		Liquidity
			Primary Liquidity Sources
			Secondary Liquidity Sources
			Factors Affecting Liquidity: Drags and Pulls
			Measuring and Evaluating Liquidity
		Managing Working Capital and Liquidity
			Working Capital Management
			Liquidity and Short-Term Funding
		Practice Problems
		Solutions
	Learning Module 5	Capital Investments and Capital Allocation
		Introduction
		Capital Investments
			Going Concern Projects
			Regulatory Compliance Projects
			Expansion of Existing Business
			New Lines of Business and Other Projects
		Capital Allocation
			Net Present Value (NPV)
			Internal Rate of Return
			Return on Invested Capital
		Capital Allocation Principles and Pitfalls
			Capital Allocation Principles
			Capital Allocation Pitfalls
		Real Options
		Practice Problems
		Solutions
	Learning Module 6	Capital Structure
		Introduction
		The Cost of Capital
		Factors Affecting Capital Structure
			Determinants of the Amount and Type of Financing Needed
			Determinants of the Costs of Debt and Equity
		Modigliani–Miller Capital Structure Propositions
			Capital Structure Irrelevance (MM Proposition I without Taxes)
			Higher Financial Leverage Raises the Cost of Equity (MM Proposition II without Taxes)
			Firm Value with Taxes (MM Proposition II with Taxes)
			Cost of Capital (MM Proposition II with Taxes)
			Cost of Financial Distress
		Optimal Capital Structure
			Target Weights and WACC
			Pecking Order Theory and Agency Costs
		Practice Problems
		Solutions
	Learning Module 7	Business Models
		Introduction
		Defining the Business Model
			Business Model Features
			Pricing and Revenue Models
			The Value Proposition (Who + What + Where + How Much)
			Business Organization and Capabilities
		Business Model Types
			Conventional Business Models
			Business Model Variations
			Business Model Innovation
			Network Effects and Platform Business Models
		Practice Problems
		Solutions
Financial Statement Analysis
	Learning Module 1	Introduction to Financial Statement Analysis
		Introduction
		Financial Statement Analysis Framework
			Articulate the Purpose and Context of the Analysis
			Collect Data
			Process Data
			Analyze/Interpret the Data
			Develop and Communicate Conclusions and Recommendations
			Follow-Up
		Scope of Financial Statement Analysis
		Regulated Sources of Information
			International Organization of Securities Commissions
			US Securities and Exchange Commission
			Capital Markets Regulation in Europe
			Financial Notes and Supplementary Schedules
			Business and Geographic Segment Reporting
			Management Commentary or Management’s Discussion and Analysis
			Auditor\'s Reports
		Comparison of IFRS with Alternative Financial Reporting Systems
			Monitoring Developments in Financial Reporting Standards
			New Products or Types of Transactions
			Evolving Standards and the Role of CFA Institute
		Other Sources of Information
		Practice Problems
		Solutions
	Learning Module 2	Analyzing Income Statements
		Introduction
		Revenue Recognition
			General Principles
			Accounting Standards for Revenue Recognition
		Expense Recognition
			General Principles
			Capitalization versus Expensing
			Capitalization of Interest Costs
			Capitalization of Internal Development Costs
			Implications for Financial Analysts: Expense Recognition
		Non-Recurring Items
			Unusual or Infrequent Items
			Discontinued Operations
			Changes in Accounting Policy
			Changes in Scope and Exchange Rates
		Earnings per Share
			Simple versus Complex Capital Structure
			Basic EPS
			Diluted EPS: The If-Converted Method
			Diluted EPS When a Company Has Convertible Preferred Stock Outstanding
			Diluted EPS When a Company Has Convertible Debt Outstanding
			Diluted EPS: The Treasury Stock Method
			Other Issues with Diluted EPS and Changes in EPS
			Changes in EPS
		Income Statement Ratios and Common-Size Analysis
			Common-Size Analysis of the Income Statement
			Income Statement Ratios
		Practice Problems
		Solutions
	Learning Module 3	Analyzing Balance Sheets
		Introduction
		Intangible Assets
			Identifiable Intangibles
		Goodwill
		Financial Instruments
		Non-Current Liabilities
			Long-Term Financial Liabilities
			Deferred Tax Liabilities
		Ratios and Common-Size Analysis
			Common-Size Analysis of the Balance Sheet
			Some interesting general observations can be made from these data:
			Balance Sheet Ratios
		Practice Problems
		Solutions
	Learning Module 4	Analyzing Statements of Cash Flows I
		Introduction
		Linkages between the Financial Statements
			Primary Financial Statements
			Relationship between Financial Statements
			Linkages Between Current Assets and Current Liabilities
		The Direct Method for Cash Flows from Operating Activities
			Operating Activities: Direct Method
		The Indirect Method for Cash Flows from Operating Activities
			Operating Activities: Indirect Method
		Conversion from the Indirect to Direct Method
			Method to Convert Cash Flow from Indirect to Direct
		Cash Flows from Investing Activities
			Cash Flows from Investing Activities
		Cash Flows from Financing Activities
			Cash Flow from Financing activities: Long-Term Debt and Common Stock
			Computing Dividends Paid
		Differences in Cash Flow Statements Prepared under US GAAP versus IFRS
		Practice Problems
		Solutions
	Learning Module 5	Analyzing Statements of Cash Flows II
		Introduction
		Evaluating Sources and Uses of Cash
		Ratios and Common-Size Analysis
		Free Cash Flow Measures
		Cash Flow Statement Analysis: Cash Flow Ratios
		Practice Problems
		Solutions
	Learning Module 6	Analysis of Inventories
		Introduction
		Inventory Valuation
		The Effects of Inflation and Deflation on Inventories, Costs of Sales, and Gross Margin
		Presentation and Disclosure
			Presentation and Disclosure
			Inventory Ratios
		Practice Problems
		Solutions
	Learning Module 7	Analysis of Long-Term Assets
		Introduction
		Acquisition of Intangible Assets
			Intangible Assets Purchased in Situations Other Than Business Combinations
			Intangible Assets Developed Internally
			Intangible Assets Acquired in a Business Combination
		Impairment and Derecognition of Assets
			Impairment of Property, Plant, and Equipment
			Impairment of Intangible Assets with a Finite Life
			Impairment of Intangibles with Indefinite Lives
			Impairment of Long-Lived Assets Held for Sale
			Reversals of Impairments of Long-Lived Assets
			Derecognition
		Presentation and Disclosure
		Using Disclosures in Analysis
		Practice Problems
		Solutions
	Learning Module 8	Topics in Long-Term Liabilities and Equity
		Introduction
		Leases
			Requirements for Lease Accounting
			Examples of Leases
			Advantages of Leasing
			Lease Classification as Finance or Operating
			Financial Reporting of Leases
			Lessee Accounting—IFRS
			Lessee Accounting—US GAAP
			Lessor Accounting
		Financial Reporting for Postemployment and Share-Based Compensation Plans
			Employee Compensation
			Deferred Compensation
			Defined-Benefit Pension Plans
			Accounting for Defined-Benefit Plans under IFRS
			Accounting for Defined-Benefit Plan under US GAAP
			Pension-Related Disclosures
			Share-Based Compensation
			Stock Grants
			Stock Options
			Accounting for Stock Options
			Other Types of Share-Based Compensation
		Presentation and Disclosure
			Presentation and Disclosure of Leases
			Lessee Disclosure
			Lessor Disclosure
			Presentation and Disclosure of Postemployment Plans
			Presentation and Disclosure of Share-Based Compensation
		Practice Problems
		Solutions
	Glossary