SCHWESERNOTES 2023 LEVEL I CFA BOOK 3 CORPORATE ISSUERS AND EQUITY INVESTMENTS

Book 3: Corporate Issuers and Equity Investments
Learning Outcome Statements (LOS)
Reading 28 Corporate Structures and Ownership
	Exam Focus
	Module 28.1: Business Structures
	Key Concepts
		LOS 28.a
		LOS 28.b
		LOS 28.c
	Answer Key for Module Quiz
Reading 29 Introduction to Corporate Governance and Other ESG Considerations
	Exam Focus
	Module 29.1: Stakeholder Management
		Conflicts of Interest Between Shareholders and Managers or Directors
		Conflicts Between Groups of Shareholders
		Conflicts of Interest Between Creditors and Shareholders
		Conflicts of Interest Between Shareholders and Other Stakeholders
		Shareholder Mechanisms
		Creditor Mechanisms
		Board of Directors and Management Mechanisms
		Employee, Customer, and Supplier Mechanisms
		Government Mechanisms
	Module 29.2: Factors Affecting Corporate Governance
		Risks of Poor Governance and Stakeholder Management
		Benefits of Effective Governance and Stakeholder Management
	Key Concepts
		LOS 29.a
		LOS 29.b
		LOS 29.c
		LOS 29.d
		LOS 29.e
		LOS 29.f
	Answer Key for Module Quizzes
Reading 30 Business Models & Risks
	Exam Focus
	Module 30.1: Business Models
	Key Concepts
		LOS 30.a
		LOS 30.b
		LOS 30.c
	Answer Key for Module Quiz
Reading 31 Capital Investments
	Exam Focus
	Module 31.1: Capital Allocation Principles
		Principles of Capital Allocation
	Module 31.2: Net Present Value and Internal Rate of Return
		Net Present Value (NPV)
		Internal Rate of Return (IRR)
		The Relative Advantages and Disadvantages of the NPV and IRR Methods
	Module 31.3: CAPITAL ALLOCATION PITFALLS AND REAL OPTIONS
	Key Concepts
		LOS 31.a
		LOS 31.b
		LOS 31.c
		LOS 31.d
		LOS 31.e
		LOS 31.f
	Answer Key for Module Quizzes
Reading 32 Working Capital & Liquidity
	Exam Focus
	Module 32.1: Sources of Capital
		Internal Sources of Funds
		Financial Intermediaries
		Capital Markets Sources of Funds
	Key Concepts
		LOS 32.a
		LOS 32.b
		LOS 32.c
		LOS 32.d
		LOS 32.e
	Answers to Module QUiz
Reading 33 Cost of Capital—Foundational Topics
	Exam Focus
	Module 33.1: Weighted Average Cost of Capital
		Calculating a Company’s Weighted Average Cost of Capital
	Module 33.2: Beta Estimation and Flotation Costs
	Key Concepts
		LOS 33.a
		LOS 33.b
		LOS 33.c
		LOS 33.d
		LOS 33.e
		LOS 33.f
		LOS 33.g
	Answer Key for Module Quizzes
Reading 34 Capital Structure
	Exam Focus
	Module 34.1: Capital Structure Theories
		MM Proposition I (No Taxes): Capital Structure Irrelevance
		MM Proposition II: Cost of Equity and Leverage
		MM with Taxes: Value is Maximized at 100% Debt
		Static Trade-Off Theory
	Module 34.2: Capital Structure Decisions
		Public Debtholders
		Preferred Stockholders
		Private Equity or Controlling Shareholders
		Banks and Private Lenders
		Customers and Suppliers
		Employees
		Managers and Directors
		Regulators and Government
	Key Concepts
		LOS 34.a
		LOS 34.b
		LOS 34.c
		LOS 34.d
		LOS 34.e
	Answer Key for Module Quizzes
Reading 35 Measures of Leverage
	Exam Focus
	Module 35.1: Measures of Leverage
	Key Concepts
		LOS 35.a
		LOS 35.b
		LOS 35.c
		LOS 35.d
		LOS 35.e
	Answer Key for Module Quiz
	Topic Quiz: Corporate Issuers
Reading 36 Market Organization and Structure
	Exam Focus
	Module 36.1: Markets, Assets, and Intermediaries
		Achievement of Purposes in the Financial System
		Return Determination
		Allocation of Capital
		Securities
		Currencies
		Contracts
		Commodities
		Real Assets
		Brokers, Dealers, and Exchanges
		Securitizers
		Depository Institutions
		Insurance Companies
		Arbitrageurs
		Clearinghouses and Custodians
	Module 36.2: Positions and Leverage
		Short Sales and Positions
		Leveraged Positions
	Module 36.3: Order Execution and Validity
		Execution Instructions
		Validity Instructions
		Clearing Instructions
		Primary Market: Public Offerings
		Primary Market: Private Placements and Other Transactions
		Importance of the Secondary Market
		Market Structures
			Quote-Driven Markets
			Order-Driven Markets
			Brokered Markets
		Market Information
	Key Concepts
		LOS 36.a
		LOS 36.b
		LOS 36.c
		LOS 36.d
		LOS 36.e
		LOS 36.f
		LOS 36.g
		LOS 36.h
		LOS 36.i
		LOS 36.j
		LOS 36.k
		LOS 36.l
	Answer Key for Module Quizzes
Reading 37 Security Market Indexes
	Exam Focus
	Module 37.1: Index Weighting Methods
		Price Weighting
		Market Capitalization Weighting
		Equal Weighting
	Module 37.2: Uses and Types of Indexes
	Key Concepts
		LOS 37.a
		LOS 37.b
		LOS 37.c
		LOS 37.d
		LOS 37.e
		LOS 37.f
		LOS 37.g
		LOS 37.h
		LOS 37.i
		LOS 37.j
		LOS 37.k
	Answer Key for Module Quizzes
Reading 38 Market Efficiency
	Exam Focus
	Module 38.1: Market Efficiency
		Active vs. Passive Portfolio Management
			Anomalies in Time-Series Data
			Anomalies in Cross-Sectional Data
			Other Anomalies
			Implications for Investors
	Key Concepts
		LOS 38.a
		LOS 38.b
		LOS 38.c
		LOS 38.d
		LOS 38.e
		LOS 38.f
		LOS 38.g
	Answer Key for Module Quiz
Reading 39 Overview of Equity Securities
	Exam Focus
	Module 39.1: Types of Equity Investments
	Module 39.2: Foreign Equities and Equity Risk
		Investors’ Required Return and the Cost of Equity
	Key Concepts
		LOS 39.a
		LOS 39.b
		LOS 39.c
		LOS 39.d
		LOS 39.e
		LOS 39.f
		LOS 39.g
		LOS 39.h
	Answer Key for Module Quizzes
Reading 40 Introduction to Industry and Company Analysis
	Exam Focus
	Module 40.1: Industry Analysis
		Commercial Classifications
		Government Classifications
	Module 40.2: Pricing Power and Company Analysis
		Barriers to Entry
		Industry Concentration
		Industry Capacity
		Market Share Stability
	Key Concepts
		LOS 40.a
		LOS 40.b
		LOS 40.c
		LOS 40.d
		LOS 40.e
		LOS 40.f
		LOS 40.g
		LOS 40.h
		LOS 40.i
		LOS 40.j
		LOS 40.k
		LOS 40.l
	Answer Key for Module Quizzes
Reading 41 Equity Valuation: Concepts and Basic Tools
	Exam Focus
	Module 41.1: Dividends, Splits, and Repurchases
	Module 41.2: Dividend Discount Models
		Estimating the Required Return for Equity
		Estimating the Growth Rate in Dividends
		Multistage Dividend Growth Models
	Module 41.3: Relative Valuation Measures
		Multiples Based on Fundamentals
		Multiples Based on Comparables
	Key Concepts
		LOS 41.a
		LOS 41.b
		LOS 41.c
		LOS 41.d
		LOS 41.e
		LOS 41.f
		LOS 41.g
		LOS 41.h
		LOS 41.i
		LOS 41.j
		LOS 41.k
		LOS 41.l
		LOS 41.m
	Answer Key for Module Quizzes
	Topic Quiz: Equity Investments
Formulas
Index