Series
CFA Level 1 Notes
41 posts
- #1
Balance Sheet
Kicking off the FRA grind from absolute zero — what Financial Reporting Analysis even is, why accounting matters, and a first peek at the balance sheet.
· 18 min read - #1
Introduction
Kicking off a weekly series to transcribe my CFA class notes — maybe with a backtest or two — on a heroic 30-min-a-day schedule. Fighting!!!!
· 2 min read - #2
Income Statement and Cash Flow Statement
Quick rundown of the income statement — what it shows, why revenue ≠ profit, and why accountants split out discontinued operations so shareholders don't get played.
· 7 min read - #3
Accrual Accounting
A casual breakdown of why accrual accounting exists — from the 'does undelivered revenue count?' dilemma to how GAAP, IFRS, and K-IFRS all fit together.
· 12 min read - #4
Inventories (1): Acquisition Cost
We kick off our B/S line-item series with inventories — what they are, how acquisition cost first hits the books, and the cash-vs-credit purchase breakdown.
· 10 min read - #5
Inventories (2): Cost Flow Assumptions
When prices and quantities change every single time you buy, you need a cost flow assumption — here's the rundown on FIFO, LIFO, weighted average, and perpetual vs. periodic.
· 10 min read - #6
Inventories (3): LIFO Reserve
A casual walkthrough of how FIFO vs. LIFO choices ripple through key financial ratios — liquidity, solvency, and activity — before diving into the LIFO reserve.
· 14 min read - #7
Inventories (4): Lower of Cost or Market (LCM)
We plug the last inventory gap: when year-end hits, unsold stock on the B/S gets valued at whichever is lower — historical cost or market value — that's the LCM method.
· 13 min read - #8
Property, Plant and Equipment (1): Acquisition
We kick off long-lived assets by diving into PP&E acquisition — what counts as an asset, why it's not just an expense, and how initial recognition works.
· 10 min read - #9
Property, Plant and Equipment (2): Depreciation
A casual breakdown of accounting depreciation for PPE — turns out it's about spreading costs over useful life, not just saying an asset lost value.
· 9 min read - #10
Property, Plant and Equipment (3): Revaluation Model
IFRS lets you pick the Revaluation Model for PPE — and here's why that's a big deal (and a headache) compared to just sticking with the Cost Model.
· 6 min read - #11
Property, Plant and Equipment (4): Impairment
Breaks down PPE impairment — what 'gone bad' actually means, how US-GAAP's two-step recovery test works, and where IFRS handles things differently.
· 8 min read - #12
Investment Property
Investment property is just rental real estate — not speculation — and here's how it differs from PPE under IFRS (spoiler: US GAAP doesn't even have this account).
· 5 min read - #13
Intangible Assets
A breakdown of intangible assets — what they are, how they stack up against PP&E, and the surprisingly messy rules for getting them onto the B/S.
· 9 min read - #14
Income Tax Expense
Breaking down how corporate tax expense actually works — from taxable income reconciliation to current vs. deferred tax — purely from the CFA angle, heh.
· 17 min read - #15
Effective Interest Rate Method: A Complete Accounting Guide
Breaking down the effective interest rate method and amortized cost from the issuer's side — because honestly, I had to fully get it myself before I could explain it!
· 15 min read - #16
Bonds
Cruising through bonds for CFA prep — par, discount, and premium bonds, how market interest rates set the price, and how it all lands on the financial statements.
· 13 min read - #17
Leases
A quick rundown of lease types and lessor/lessee basics you need to know — even though leases are basically gone from CFA Level 1 now, heh heh heh.
· 11 min read - #18
Pension
Quick intro to post-employment benefits and why you can't just slap a retirement payout on the I/S all at once — matching principle, retirement allowance systems, and more.
· 7 min read - #19
Financial Ratios (1): Financial Analysis Techniques
A breezy intro to why financial ratios are surprisingly tricky — cross-company comparisons, IFRS vs US-GAAP headaches, the Samsung problem, and whether a 200% debt ratio is even bad.
· 15 min read - #20
Financial Ratios (2): Financial Analysis Techniques
Part 2 of financial ratios — breaking down liquidity ratios like the Current, Quick, Cash, and Defensive Interval ratios with actual intuition, not just exam memorization.
· 15 min read - #21
DuPont Analysis
DuPont Analysis is basically about ripping ROE apart into three pieces — Net Profit Margin, Asset Turnover, and Financial Leverage — so each one actually means something.
· 5 min read - #22
Financial Assets and Accounts Receivable
Back to the B/S! We dig into financial assets, break down non-derivative instruments, and learn why the classic maturity-date rule for debt vs. equity doesn't always hold up.
· 16 min read - #23
Equity
A casual (expectations: low!) walkthrough of equity on the balance sheet — paid-in capital, par value, share premium, and just enough accounting cycle to get by for the CFA exam.
· 17 min read - #24
Statement of Changes in Equity and Non-Recurring Items
A breezy tour of the Statement of Changes in Equity, then a quick rundown on bad debt and warranty expense — and how both quietly create DTAs on the B/S.
· 6 min read - #25
Cash Flow Statement
We finally made it to the cash flow statement — why it exists, why accrual alone isn't enough, and how CFO/CFI/CFF each tell a different part of the story.
· 8 min read - #25
Earnings Per Share (EPS)
Breaking down EPS the CFA way — weighted average shares, preferred stock deductions, and why dilutive securities make the whole thing a little messy.
· 13 min read - #26
Cash Flow Statement and EBITDA
Working through a real B/S and I/S to build a Cash Flow Statement step by step — tagging every line item as O, I, or F and smashing out CFI, CFF, and CFO the direct way.
· 12 min read - #27
Free Cash Flow and FRA Wrap-Up
Finally putting a period on FRA with a casual-but-essential look at FCFF and FCFE — what they are, how to build them from net income, and why WACC is the right discount rate.
· 12 min read - #28
What Is a Bond? The Fundamental Difference from Equity
Kicking off Fixed Income for CFA Level 1 — what a bond actually is, why interest is called a coupon, and how it's fundamentally different from a stock.
· 11 min read - #29
Types of Bonds
A quick rundown of bond types by how they pay interest — floaters, inverse floaters, PIK bonds, index-linked, and the contingency provisions baked right in.
· 8 min read - #30
Key Fixed Income Terminology
A casual rundown of fixed income exam keywords — LIBOR, bond issuance methods, underwritten vs. best efforts offerings, primary dealers, and shelf registration.
· 9 min read - #31
Bond Valuation
Bond valuation is just PV of future cash flows — once you lock in why price adjusts to match required return, the rest of fixed income stops wrecking your mental health. heh heh!!
· 12 min read - #32
Yield Measures
Breaking down why coupon rate isn't your bond's 'true' yield, and how payment frequency changes everything when you're comparing bonds apple to apple.
· 9 min read - #33
Understanding Geometric Mean Return for the Yield Curve
Finally tackling the yield curve — but first, why geometric mean return (not arithmetic mean) is the only correct way to think about % gains over time.
· 7 min read - #34
Yield Curve
Finally cracking open the yield curve — spot rates, zero coupon bonds, and why discounting everything at one single yield is kinda ridiculous.
· 7 min read - #35
Yield Spread
A casual breakdown of yield spreads — what G-spread and I-spread actually mean, why swap rates beat LIBOR as the private-sector risk-free rate, and how traders decide if a bond is cheap or rich.
· 6 min read - #36
Price Risk, Reinvestment Risk, and Duration
YTM secretly assumes you reinvest every coupon at YTM itself — and that hidden assumption is exactly where price risk and reinvestment risk come from.
· 12 min read - #37
Credit Analysis and Credit Ratings
A breezy skim through credit analysis — cash flow, bond indentures, and why credit loss is basically just lottery math but for money you might lose.
· 7 min read - #38
Asset-Backed Securities (ABS) and the Global Financial Crisis
ABS, MBS, maturity mismatches, and yes — the full 2008 meltdown with AIG and everything. Buckle up, it's the grand finale of the Fixed Income series!
· 9 min read - #39
Fixed Income Wrap-Up
Wrapping up the whole Fixed Income series with a keyword-by-keyword tour of securitization, covered bonds, RMBS vs. CMBS, and call protection mechanics.
· 10 min read