Chartered Financial Analyst (CFA) LEVEL 1 Questions with Correct Answers.

Financial Statement Analysis Framework Correct Answer provides an overview of the methodology used by analysts to consistently analyze financial statements 1. articulate the purpose and context of analysis 2. collecting data 3. process the data 4. analyzing and interpreting the processed data 5. develop/communicate conclusions and recommendations 6. follow up Scope of Financial Statement Analysis Correct Answer - analysis is based on financial statements is performed by equity investors interested in valuation, lenders interested in liquidity, suppliers interested in future business, and analysts working to recommend security purchases, mergers, credit and lending, debt ratings, and forecasting Balance Sheet - Assets Correct Answer - assets are items owned by a company that will benefit the company in the future - found on balance sheet; include current/noncurrent - required to be listed separately under IFRS - typically shown on balance sheet at historical cost Income Statement - Introduction Correct Answer - reports revenues, expenses, and profit or loss for a company on a consolidated basis over a short period of time - revenues are matched with expenses incurred to earn the revenue, and the net result is a profit or a loss for the period - when the company reports on a consolidated basis, they include all companies they own in one income statement Statement of Changes in Equity (1) Correct Answer - reconciles the balance in equity from the beginning of a period to the end of a period - equity is composed of paid-in capital, retained earnings, other comprehensive income, and minority interests