CFA 2020 level i schwesernotes book 3

Contents Learning Outcome Statements (LOS) Reading 19: Introduction to Financial Statement Analysis Exam Focus Module 19.1: Financial Statement Roles Module 19.2: Footnotes, Audit, and Analysis Key Concepts Answer Key for Module Quizzes Reading 20: Financial Reporting Standards Exam Focus Module 20.1: Standards Overview Module 20.2: Financial Reporting Framework Key Concepts Answer Key for Module Quizzes Reading 21: Understanding Income Statements Exam Focus Module 21.1: Income Statement Overview Module 21.2: Revenue Recognition Module 21.3: Expense Recognition Module 21.4: EPS and Dilutive Securities Module 21.5: Common-Size Income Statements Key Concepts Answer Key for Module Quizzes Reading 22: Understanding Balance Sheets Exam Focus Module 22.1: Balance Sheet Introduction Module 22.2: Assets and Liabilities Module 22.3: Current Assets and Liabilities Module 22.4: Noncurrent Assets and Liabilities Module 22.5: Intangible Assets Module 22.6: Marketable Securities Answer Key for Module Quizzes Reading 23: Understanding Cash Flow Statements Exam Focus Module 23.1: Cash Flow Introduction Module 23.2: The Direct and Indirect Methods Module 23.4: Free Cash Flow and Ratios Key Concepts Answer Key for Module Quizzes Reading 24: Financial Analysis Techniques Exam Focus Module 24.1: Introduction to Financial Ratios Module 24.2: Financial Ratios, Part Module 24.3: Financial Ratios, Part Module 24.4: DuPont Analysis Module 24.5: More Financial Ratios Key Concepts Answer Key for Module Quizzes Reading 25: Inventories Exam Focus Module 25.1: Cost Flow Methods Module 25.2: Inventory Systems Module 25.3: Converting LIFO to FIFO Module 25.4: Inventory Valuation Module 25.5: Inventory Analysis Key Concepts Answer Key for Module Quizzes Reading 26: Long-Lived Assets Exam Focus Module 26.1: Capitalization vs Expensing Module 26.2: Depreciation Module 26.3: Impairment and Revaluation Module 26.4: Fixed Asset Disclosures Key Concepts Answer Key for Module Quizzes 10 Reading 27: Income Taxes Exam Focus Module 27.1: Tax Terms Module 27.2: Deferred Tax Liabilities and Assets Module 27.3: Deferred Tax Examples Module 27.4: Change in Tax Rates Module 27.5: Permanent Differences Key Concepts Answer Key for Module Quizzes 11 Reading 28: Non-Current (Long-Term) Liabilities Exam Focus Module 28.1: Bond Issuance Module 28.2: Discount and Premium Bonds Module 28.3: Issuance Cost, Derecognition, and Disclosures Module 28.4: Lease and Pension Accounting Key Concepts Answer Key for Module Quizzes 12 Reading 29: Financial Reporting Quality Exam Focus Module 29.1: Reporting Quality Module 29.2: Accounting Choices and Estimates Module 29.3: Warning Signs Key Concepts Answer Key for Module Quizzes 13 Reading 30: Applications of Financial Statement Analysis Exam Focus Module 30.1: Forecasting Module 30.2: Credit and Equity Analysis Key Concepts Answer Key for Module Quiz 14 Topic Assessment: Financial Reporting and Analysis Topic Assessment Answers: Financial Reporting and Analysis 15 Formulas List of pages 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 vi vii viii ix x xi 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 150 151 152 153 154 155 156 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universe of stocks, using minimum or maximum values of one or more ratios Which (and how many) ratios to use, what minimum or maximum values to use, and how much importance to give each ratio all present challenges to the analyst LOS 30.e When companies use different accounting methods or estimates relating to areas such as inventory accounting, depreciation, capitalization, and off-balance-sheet financing, analysts must adjust the financial statements for comparability LIFO ending inventory can be adjusted to a FIFO basis by adding the LIFO reserve LIFO cost of goods sold can be adjusted to a FIFO basis by subtracting the change in the LIFO reserve When calculating solvency ratios, analysts should estimate the present value of operating lease obligations and add it to the firm’s liabilities ANSWER KEY FOR MODULE QUIZ Module Quiz 30.1, 30.2 A To analyze this company’s operating strategy, calculate its activity ratios: Inventory turnover Receivables turnover Payables turnover Days of inventory on hand Days of sales outstanding Number of days of payables 20X7 2.25 2.55 2.78 20X8 2.48 2.58 2.73 20X9 2.79 2.55 2.73 162 143 132 147 142 134 131 143 134 The ratios that have changed most significantly are the ones related to inventory Receivables and payables performance has remained steady, suggesting no change in the company’s use of supplier credit or extension of customer credit (Module 30.1, LOS 30.a) A Projections of net income and cash flows are typically based on assumptions that cost of goods sold, operating expenses, and noncash working capital remain a constant percentage of sales The projections then show whether additional borrowing is needed during the forecast period If so, the analyst will adjust the interest expense to reflect the additional debt (Module 30.1, LOS 30.b) C Lower leverage improves a company’s creditworthiness Larger scale, more diversification, higher operating efficiency, and more stable margins also tend to indicate better credit quality (Module 30.2, LOS 30.c) C Firms with high growth rates will tend to have high market values relative to the book value of their equity Low price to cash flow ratios would tend to identify value stocks rather than growth stocks Screening for high dividend payout ratios would tend to identify mature firms with relatively few growth opportunities (Module 30.2, LOS 30.d) B Cash flows are the same under either method Differences in depreciation methods and IFRS versus U.S GAAP reporting can require an analyst to adjust financial statements to make them comparable (Module 30.2, LOS 30.e) C To adjust LIFO financial statement data to a FIFO basis, add the LIFO reserve to inventories on the balance sheet and subtract the change in the LIFO reserve from cost of sales on the income statement Remember that the balance sheet is cumulative (use the full LIFO reserve) while the income statement refers to the most recent period (use the change for the period in the LIFO reserve) (Module 30.2, LOS 30.e) C Remaining useful life = net PP&E / depreciation expense Average age of assets = accumulated depreciation / depreciation expense Average useful life = gross PP&E / depreciation expense (Module 30.2, LOS 30.e) A The appropriate adjustment for operating leases is to treat them as if they were capital leases by estimating the present value of the future lease obligations and adding that value to the firm’s liabilities and long-lived assets (Module 30.2, LOS 30.e) TOPIC ASSESSMENT: FINANCIAL REPORTING AND ANALYSIS You have now finished the Financial Reporting and Analysis topic section The following Topic Assessment provides immediate feedback on how effective your study has been for this material The number of questions on this test is equal to the number of questions for the topic on one-half of the actual Level I CFA exam Questions are more exam-like than typical Module Quiz or QBank questions; a score of less than 70% indicates that your study likely needs improvement These tests are best taken timed; allow 1.5 minutes per question After you’ve completed this Topic Assessment, you may additionally log in to your Schweser.com online account and enter your answers in the Topic Assessments product Select “Performance Tracker” to view a breakdown of your score Select “Compare with Others” to display how your score on the Topic Assessment compares to the scores of others who entered their answers The fundamental qualitative characteristics of financial statements as described by the IASB conceptual framework least likely include: A relevance B reliability C faithful representation A decrease in a firm’s inventory turnover ratio is most likely to result from: A a write-down of inventory B goods in inventory becoming obsolete C decreasing purchases in a period of stable sales Two firms are identical except that the first pays higher interest charges and lower dividends, while the second pays higher dividends and lower interest charges Both prepare their financial statements under U.S GAAP Compared to the first, the second will have cash flow from financing (CFF) and earnings per share (EPS) that are: A B C CFF The same Lower Lower EPS Higher Higher The same The following information is summarized from Famous, Inc.’s financial statements for the year, which ended December 31, 20X0: Sales were $800,000 Net profit margin was 20% Sales to assets was 50% Equity multiplier was 1.6 Interest expense was $30,000 Dividends declared were $32,000 Famous, Inc.’s sustainable growth rate based on results from this period is closest to: A 3.2% B 8.0% C 12.8% On January 1, Orange Computers issued employee stock options for 400,000 shares Options on 200,000 shares have an exercise price of $18, and options on the other 200,000 shares have an exercise price of $22 The year-end stock price was $24, and the average stock price over the year was $20 The change in the number of shares used to calculate diluted earnings per share for the year due to these options is closest to: A 20,000 shares B 67,000 shares C 100,000 shares A snowmobile manufacturer that uses LIFO begins the year with an inventory of 3,000 snowmobiles, at a carrying cost of $4,000 each In January, the company sells 2,000 snowmobiles at a price of $10,000 each In July, the company adds 4,000 snowmobiles to inventory at a cost of $5,000 each Compared to using a perpetual inventory system, using a periodic system for the firm’s annual financial statements would: A increase COGS by $2,000,000 B leave ending inventory unchanged C decrease gross profit by $4,000,000 Which of the following is least likely to result in low-quality financial statements? A Unsustainable cash flows B Activities that manage earnings C Conservative accounting choices Train Company paid $8,000,000 to acquire a franchise at the beginning of 20X5 that was expensed in 20X5 If Train had elected to capitalize the franchise as an intangible asset and amortize the cost of the franchise over eight years, what effect would this decision have on Train’s 20X5 cash flow from operations (CFO) and 20X6 debt-toassets ratio? A Both would be higher with capitalization B Both would be lower with capitalization C One would be higher and one would be lower with capitalization Graphics, Inc has a deferred tax asset of $4,000,000 on its books As of December 31, it is probable that $2,000,000 of the deferred tax asset’s value will never be realized because of the uncertainty about future income Under U.S GAAP, Graphics, Inc should: A reduce the deferred tax asset account by $2,000,000 B establish a valuation allowance of $2,000,000 C establish an offsetting deferred tax liability of $2,000,000 10 Long-lived assets cease to be depreciated when the firm’s management decides to dispose of the assets by: A sale B abandonment C exchange for another asset 11 An asset’s tax base is most accurately described as the: A tax-deductible expense that appears in the tax return in a given period B amount of the asset that will not be expensed through the tax return in the future as the economic benefits of the asset are realized C amount of the asset to be expensed through the tax return in the future as the economic benefits of the asset are realized 12 In the notes to its financial statements, Gilbert Company discloses a €400,000 reversal of an earlier write-down of inventory values, which increases this inventory’s carrying value to €2,000,000 It is most likely that: A the reasons for this reversal are also disclosed B a gain of €400,000 appears on the income statement C the net realizable value of this inventory is €2,000,000 13 If a firm’s management wishes to use its discretion to increase operating cash flows, it is most likely to: A capitalize an expense B decrease the allowance for uncollectible accounts C change delivery terms from FOB destination to FOB shipping point 14 A firm that purchases a building that it intends to rent out for income would report this asset as investment property under: A U.S GAAP only B IFRS only C both U.S GAAP and IFRS 15 When a company redeems bonds before they mature, the gain or loss on debt extinguishment is calculated as the bonds’ carrying amount minus the: A face or par value of the bonds B amount required to redeem the bonds C amortized historical cost of the bonds 16 Which of the following terms from the extended DuPont equation would an analyst least likely be able to obtain, given only a company’s common-size income statement and common-size balance sheet? The company’s: A EBIT margin B asset turnover C financial leverage 17 An analyst is comparing two firms, one that reports under IFRS and one that reports under U.S GAAP An analyst is least likely to which of the following to facilitate a comparison of the companies? A Add the LIFO reserve to inventory for a United States-based firm that uses LIFO B Add the present values of each firm’s future minimum operating lease payments to both assets and liabilities C Adjust the income statement of one of the firms if both have significant unrealized gains or losses from changes in the fair values of trading securities 18 An analyst wants to compare the cash flows of two United States companies, one that reports cash flow using the direct method and one that reports it using the indirect method The analyst is most likely to: A convert the indirect statement to the direct method to compare the firms’ cash expenditures B adjust the reported CFO of the firm that reports under the direct method for depreciation and amortization expense C increase CFI for any dividends reported as investing cash flows by the firm reporting cash flow by the direct method TOPIC ASSESSMENT ANSWERS: FINANCIAL REPORTING AND ANALYSIS B The fundamental qualitative characteristics of financial statements according to the IASB are relevance and faithful representation (Study Session 6, Module 20.2, LOS 20.c) B Obsolescence can cause goods in inventory to remain unsold, which tends to reduce the inventory turnover ratio (COGS / average inventory) Write-downs of inventory increase the inventory turnover ratio by decreasing the denominator If purchases decrease while sales remain stable, inventory decreases, which increases the inventory turnover ratio (Study Session 7, Module 24.2, LOS 24.b) B Interest paid is an operating cash flow, and dividends paid are a financing cash flow, so the firm that pays higher dividends will have lower CFF The firm with lower interest expense will have higher EPS (Study Session 7, Module 23.1, LOS 23.e) C Famous, Inc.’s sustainable growth rate = (retention rate)(ROE) ROE = 0.20(800,000) / [(800,000 / 0.5)(1 / 1.6)] = 160,000 / 1,000,000 = 16% Alternatively: ROE = (0.20)(0.50)(1.6) = 0.16 = 16% Retention rate = (1 − dividend payout ratio) = − {32,000 / [(0.20)(800,000)]} = 0.80 Sustainable growth = 0.80(16%) = 12.8% (Study Session 7, Module 24.5, LOS 24.e) A Based on the average stock price, only the options at 18 are in the money (and therefore dilutive) Using the treasury stock method, the average shares outstanding for calculating diluted EPS would increase by [(20 − 18) / 20]200,000 = 20,000 shares (Study Session 7, Module 21.4, LOS 21.g) A Under a perpetual inventory system, the snowmobiles sold in January are associated with the $4,000 cost of the beginning inventory Cost of sales is $8,000,000, gross profit is $12,000,000, and end-of-year inventory is $24,000,000 Under a periodic inventory system, the snowmobiles sold in January would be associated with the $5,000 cost of the snowmobiles manufactured in July Cost of sales would be higher by $2,000,000, gross profit would be lower by $2,000,000, and ending inventory would be lower by $2,000,000 (Study Session 8, Module 25.2, LOS 25.c) A Even if earnings or cash flows are unsustainable (i.e., low quality), the firm’s financial statements can still be high quality Conservative accounting choices are considered to be biased compared to the ideal of neutral accounting choices Earnings management is viewed as reducing the quality of a firm’s financial statements (Study Session 9, Module 29.1, LOS 29.a) C If the cost was amortized rather than expensed, the $8,000,000 cost of the franchise would be classified as an investing cash flow rather than an operating cash flow, so CFO would increase (and CFI decrease) The asset created by capitalizing the cost would increase assets, so the debt-to-assets ratio would decrease (Study Session 8, Module 26.1, LOS 26.c) B If it becomes probable that a portion of a deferred tax asset will not be realized, a valuation allowance should be established A valuation allowance serves to reduce the value of a deferred tax asset for the probability that it will not be realized (the difference between tax payable and income tax expense will not reverse in future periods) (Study Session 8, Module 27.5, LOS 27.g) 10 A Under both IFRS and U.S GAAP, long-lived assets that are reclassified as held for sale cease to be depreciated Long-lived assets that are to be abandoned or exchanged are classified as held for use until disposal and continue to be depreciated (Study Session 8, Module 26.3, LOS 26.j) 11 C The tax base of an asset represents the amounts that will be expensed through the tax return in future periods (Study Session 8, Module 27.1, LOS 27.c) 12 A Required disclosures related to inventories under IFRS include the amount of any reversal of previous write-downs and the circumstances that led to the reversal Under IFRS, the reversal of an inventory write-down is not recognized as a gain, but instead as a reduction in the cost of sales for the period From only the information given, we cannot conclude that the net realizable value of the inventory is €2,000,000 This value may be the original cost of the inventory (Study Session 8, Module 25.4, LOS 25.i) 13 A By capitalizing a purchase instead of recognizing it as an expense in the current period, a firm increases operating cash flow by classifying the cash outflow as CFI rather than CFO Decreasing the allowance for uncollectible accounts or changing delivery terms for shipments from FOB destination to FOB shipping point would increase earnings but would not affect operating cash flows (Study Session 9, Module 29.2, LOS 29.h) 14 B Under IFRS, the building is classified as investment property U.S GAAP does not distinguish investment property from other types of long-lived assets (Study Session 8, Module 26.4, LOS 26.n) 15 B Under IFRS, when a company redeems bonds before they mature, the company records a gain or loss equal to the bonds’ carrying amount minus the cash amount required to redeem the bonds (Study Session 8, Module 28.3, LOS 28.c) 16 B Asset turnover—revenue/assets —requires an item from the income statement and an item from the balance sheet, so this ratio cannot be obtained from the common-size statements The EBIT margin—EBIT/revenue (or sales)—would be on a common-size income statement Financial leverage—assets/equity—is the reciprocal of equity/assets, which would be shown on a common-size balance sheet (Study Session 7, Modules 21.5, 22.7, 24.4, LOS 21.i, 22.g, 24.d) 17 C Unrealized gains and losses on trading securities are reported in the income statement under both U.S and IFRS standards Since LIFO is not permitted under IFRS, adjusting the inventory amount for a LIFO firm is a likely adjustment To account for differences in how companies report leases, adding the present value of future minimum operating lease payments to both the assets and liabilities of a firm will remove the effects of lease reporting methods from solvency and leverage ratios (Study Session 9, Module 30.2, LOS 30.e) 18 A By converting a cash flow statement to the direct method, an analyst can view cash expenses and receipts by category, which will facilitate a comparison of two firms’ cash outlays and receipts CFO is correct under either method and requires no adjustment Neither dividends received nor dividends paid are classified as CFI under U.S GAAP (Study Session 7, Module 23.3, LOS 23.g) FORMULAS Activity Ratios: receivables turnover = annual sales average receivables days of sales outstanding = inventory turnover = 365 receivables turnover cost of goods sold average inventory days of inventory on hand = payables turnover = 365 inventory turnover purchases average trade payables 365 payables turnover ratio revenue total asset turnover = average total assets revenue fixed asset turnover = average net fixed assets working capital turnover = average revenue working capital number of days of payables = Liquidity Ratios: current ratio = quick ratio = current assets current liabilities cash + marketable securities + receivables current liabilities marketable securities cash ratio = cash +current liabilities defensive interval = cash+marketable securities+receivables average daily expenditures cash conversion cycle = days sales days of inventory number of days ( )+( ) –( ) outstanding on hand of payables Solvency Ratios: total debt total shareholders’ equity debt-to-equity = debt-to-capital = debt-to-assets = total debt total debt+total shareholders’ equity total debt total assets financial leverage = interest coverage = average total assets average total equity earnings before interest and taxes interest payments fixed charge coverage = earnings before interest and taxes+lease payments interest payments+lease payments Profitability Ratios: net profit margin = net income revenue gross profit revenue operating income operating profit margin = revenue EBT pretax margin = revenue gross profit margin = or EBIT revenue return on assets (ROA) = net income average total assets return on assets (ROA) = net income+interest expense (1−tax rate) average total assets operating return on assets = return on total capital = return on equity = or EBIT average total assets EBIT average total capital net income average total equity return on common equity = = operating income average total assets net income – preferred dividends average common equity net income available to common average common equi ty Free Cash Flow to the Firm: FCFF = net income + noncash charges + [cash interest paid × (1 − tax rate)] − fixed capital investment − working capital investment FCFF = cash flow from operations + [cash interest paid × (1 − tax rate)] − fixed capital investment Free Cash Flow to Equity: FCFE = cash flow from operations − fixed capital investment + net borrowing common-size income statement ratios = common-size balance sheet ratios = common-size cash flow ratios = income statement account sales balance sheet account total assets cash flow statement account revenues original DuPont equation: ROE = ( net profit leverage asset )( )( ) margin turnover ratio extended DuPont equation: income EBT EBIT revenue total assets ROE = ( netEBT ) ( EBIT ) ( revenue ) ( total ) ( total ) assets equity net income−preferred dividends basic EPS = weighted average number of common shares outstanding diluted EPS = ⎡ convertible ⎤ ⎛ convertible ⎞ [net income− ⎡ convertible ⎤ ⎛ convertible ⎞ preferred ]+⎢ preferred ⎥+⎜ debt ⎟(1–t) dividends ⎣ dividends ⎦ ⎝ interest ⎠ shares ⎛ weighted ⎞ ⎛ shares from ⎞ ⎛ shares from ⎞ ⎛ ⎞ ⎜ average ⎟ +⎜ conversion of ⎟+⎜ conversion of ⎟+ ⎜ issuable from ⎟ ⎝ shares ⎠ ⎝ conv pfd shares ⎠ ⎝ conv debt ⎠ ⎝ stock options ⎠ Coefficients of Variation: CV sales = standard deviation of sales mean sales CV operating income = CV net income = standard deviation of operating income mean operating income standard deviation of net income mean net income Inventories: ending inventory = beginning inventory + purchases − COGS FIFO COGS = LIFO COGS − (ending LIFO reserve − beginning LIFO reserve) Long-Lived Assets: −salvage value straight-line depreciation = cost useful life DDB depreciation = ( useful ) (cost – accumulated depreciation) life units-of-production depreciation = original cost−salvage value life in output units average age = × output units in the period accumulated depreciation annual depreciation expense total useful life = historical cost annual depreciation expense remaining useful life = ending net PP&E annual depreciation expense Deferred Taxes: income tax expense = taxes payable + ΔDTL − ΔDTA Debt Liabilities: interest expense = ( balancesheetvalueoftheliability market rate )×( ) atthebeginningoftheperiod at issue Performance Ratios: CFO net revenue cash flow-to-revenue = cash return-on-assets = CFO average total assets CFO average total equity CFO cash return-on-equity = cash-to-income = CFO operating income cash flow per share = CFO−preferred dividends weighted average number of common shares Coverage Ratios: debt coverage = CFO total debt interest coverage = reinvestment = debt payment = CFO + interest paid + taxes paid interest paid CFO cash paid for long-term assets CFO cash long-term debt repayment dividend payment = CFO dividends paid investing and financing = CFO cash outflows from investing and financing activities All rights reserved under International and Pan-American Copyright Conventions By payment of the required fees, you have been granted the non-exclusive, non-transferable right to access and read the text of this eBook on screen No part of this text may be reproduced, transmitted, downloaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any forms or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of the publisher SCHWESERNOTES™ 2020 LEVEL I CFAđ BOOK 3: FINANCIAL REPORTING AND ANALYSIS â2019 Kaplan, Inc All rights reserved Published in 2019 by Kaplan, Inc Printed in the United States of America ISBN: 978-1-4754-9512-6 These materials may not be copied without written permission from the author The unauthorized duplication of these notes is a violation of global copyright laws and the CFA Institute Code of Ethics Your assistance in pursuing potential violators of this law is greatly appreciated Required CFA Institute disclaimer: “CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by Kaplan Schweser CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.” Certain materials contained within this text are the copyrighted property of CFA Institute The following is the copyright disclosure for these materials: “Copyright, 2019, CFA Institute Reproduced and republished from 2020 Learning Outcome Statements, Level I, II, and III questions from CFA® Program Materials, CFA Institute Standards of Professional Conduct, and CFA Institute’s Global Investment Performance Standards with permission from CFA Institute All Rights Reserved.” Disclaimer: The SchweserNotes should be used in conjunction with the original readings as set forth by CFA Institute in their 2020 Level I CFA Study Guide The information contained in these Notes covers topics contained in the readings referenced by CFA Institute and is believed to be accurate However, their accuracy cannot be guaranteed nor is any warranty conveyed as to your ultimate exam success The authors of the referenced readings have not endorsed or sponsored these Notes ... 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 vi vii viii ix x xi 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 48 49 50 51 52 53 54... coverage corresponds with the following CFA Institute assigned reading: 28 Non-Current (Long-Term) Liabilities The candidate should be able to: a determine the initial recognition, initial measurement... a describe tools and techniques used in financial analysis, including their uses and limitations (page 111) b classify, calculate, and interpret activity, liquidity, solvency, profitability, and