CFAI Mock Flashcards
3/10, net 40
For account payables, 3% discount if paid in 10 days, need to pay in 40 days
Cost of trade credit calculation
Cost of trade credit = (1 + Discount/(1-Discount) ) ^ (365/Number of days beyond discount period)
For example, 3/10 net 40
= (1 + 3%/(1+3%) )^ (365/(40-10))
Which profit does firm need to stay in business?
Normal profit
LowP/E Ratio
Identify value stock, exclude growth stock. Think of as value stock has low price, while although growth stock has high price, it grows quickly
Retained earning calculation
Beginning RE + Net Income - Dividends
Shareholder’s equity calculation
Shareholder’s equity = share capital + Retained Earnings - Treasury Shares
Earning before tax
Sales minus the cost of goods sold, interest and selling, general and administrative expenses have been subtracted from gross sales
What kind of industry have higher economic profit?
The economic profit
tends to be larger in industries with differentiated products, greater pricing power, and high
switching costs to customers.
Convexity of callable and putable bonds
When interest rates rise, a putable bond is more likely to be put back to the issuer by the investor,
limiting the loss of value and giving the bond more positive convexity than an option-free bond.
A callable bond is likely to be called from the investor when interest rates fall, limiting the
gain in value and giving the bond negative convexity
Given spot rate S1,S2,S3,S4, calculate bond (coupon P) price
P/S1 + P/(S1*S2) + P/(S1+S2+S3) + …
What happens if a member’s CFA designation got suspended?
He can begin to use it after expiration of the suspension period
If candidate disagree on a report which has her as author, can she issue a new report?
Standard IV(A): Loyalty calls for employees to be loyal to their employer by not causing harm. If
candidate released a contradictory research recommendation report to clients, it could possibly cause
confusion among clients and embarrassment to the firm.
If a candidate write free recommendation to a newspaper, should he send newest recommendation to his client and newspaper at the same time?
To avoid violating Standard III(A), Candidate
must ensure any change in an investment recommendation is first distributed to her asset
management clients before any newsletter recipients, who are not necessarily clients
Which travel fee can the candidate require to be paid by other company?
Candidate should only accept transportation that he is otherwise unlikely be able to find viable
Current account
It measures the flows of goods and services.
Current account deficit must be compensated by surplus in sum of capital account and financial account
- Merchandise and services (imports, exports)
- Income receipts
- Unilateral transfers
Capital account
Capital transfers and acquisition and disposal of non-produced, non-financial assets
- Capital transfers
- Sales and purchase of non-financial assets
Financial acount
Records investment flows
- Government owned asset abroad
- Foreign-owned assets in the domestic country
Financial ratios are least likely sufficient to determine company’s
Creditworthiness
Change in investment property value
All changes are reported under net income
Where does the securitization of account receivable proceeding go?
Cash from operation
Which intangible asset should be amortized?
Identifiable intangible asset.
Goodwill is unidentifiable intangible, should be tested for impairment but not amortized.
Reputation is internal and is not recorded on balance sheet.
Cash flow debt coverage ratio
CFO/Total debt
Antidilutive
A transaction is considered to be antidilutive if its effect is to increase the amount of EPS, either by lowering the share count or increasing earnings.
Equity return distribution are leptokurtotic or playkurtotic?
Leptokurtotic
