Podcast
Questions and Answers
Which component is NOT included in the Front Matter of the Initial Company Research Report?
Which component is NOT included in the Front Matter of the Initial Company Research Report?
What analysis is essential for evaluating a company's competitive environment?
What analysis is essential for evaluating a company's competitive environment?
Which approach is NOT part of the valuation section in the Initial Company Research Report?
Which approach is NOT part of the valuation section in the Initial Company Research Report?
Which element is least likely to impact pricing power according to revenue analysis?
Which element is least likely to impact pricing power according to revenue analysis?
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In assessing risks, which factor is considered most material for financial analysis?
In assessing risks, which factor is considered most material for financial analysis?
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Which aspect of the business model relates directly to revenue generation?
Which aspect of the business model relates directly to revenue generation?
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Which of the following is NOT a key driver of industry size and growth?
Which of the following is NOT a key driver of industry size and growth?
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Which source of information is NOT typically involved in determining business models?
Which source of information is NOT typically involved in determining business models?
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What characterizes an intentional strategy in a company?
What characterizes an intentional strategy in a company?
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What is the main risk of being 'stuck in the middle' for a company?
What is the main risk of being 'stuck in the middle' for a company?
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Which of the following is not one of the three competitive strategies?
Which of the following is not one of the three competitive strategies?
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What does the principle of 'Simplicity' suggest in forecasting?
What does the principle of 'Simplicity' suggest in forecasting?
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Which of the following approaches relies on industry averages for stable conditions?
Which of the following approaches relies on industry averages for stable conditions?
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Which of the following best describes the importance of Regular Disclosure in forecasting?
Which of the following best describes the importance of Regular Disclosure in forecasting?
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What should a company assess when conducting a forward-looking evaluation?
What should a company assess when conducting a forward-looking evaluation?
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What does the principle of Ad Hoc in forecasting address?
What does the principle of Ad Hoc in forecasting address?
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What effect does high operating leverage have on profit growth?
What effect does high operating leverage have on profit growth?
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Which metric measures the impact of sales change on operating profit change?
Which metric measures the impact of sales change on operating profit change?
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What factor influences long-term operating costs according to the text?
What factor influences long-term operating costs according to the text?
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Which cost primarily includes variable component classifications?
Which cost primarily includes variable component classifications?
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How is the net working capital to sales ratio useful for a business?
How is the net working capital to sales ratio useful for a business?
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What might negative net working capital indicate about a company's operations?
What might negative net working capital indicate about a company's operations?
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What is primarily indicated by the cost-to-revenue ratio in an analysis?
What is primarily indicated by the cost-to-revenue ratio in an analysis?
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Which of the following statements accurately describes economies of scale?
Which of the following statements accurately describes economies of scale?
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What is the primary purpose of scenario analysis in forecasting?
What is the primary purpose of scenario analysis in forecasting?
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Which step in the scenario analysis involves judging the probability of various outcomes?
Which step in the scenario analysis involves judging the probability of various outcomes?
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In the context of equity valuation, what does the term 'fairly valued' imply?
In the context of equity valuation, what does the term 'fairly valued' imply?
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What is one of the main objectives of risk mitigation in scenario analysis?
What is one of the main objectives of risk mitigation in scenario analysis?
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Which valuation model uses assumptions about future dividends to estimate an asset's value?
Which valuation model uses assumptions about future dividends to estimate an asset's value?
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What is a key characteristic of multipler models in equity valuation?
What is a key characteristic of multipler models in equity valuation?
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Which of the following statements is true about the Gordon Growth Model?
Which of the following statements is true about the Gordon Growth Model?
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What factor is considered when estimating depreciation based on net PP&E?
What factor is considered when estimating depreciation based on net PP&E?
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What is a key consideration when cross-checking competitors' gross margins?
What is a key consideration when cross-checking competitors' gross margins?
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How should selling and distribution expenses typically be modeled in relation to sales?
How should selling and distribution expenses typically be modeled in relation to sales?
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What is crucial when using efficiency ratios for working capital projections?
What is crucial when using efficiency ratios for working capital projections?
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What distinguishes maintenance CapEx from growth CapEx?
What distinguishes maintenance CapEx from growth CapEx?
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When forecasting capital structure, which element is NOT typically considered?
When forecasting capital structure, which element is NOT typically considered?
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What approach is recommended for forecasting working capital relative to historical results?
What approach is recommended for forecasting working capital relative to historical results?
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What is a common leverage ratio used to assess capital structure?
What is a common leverage ratio used to assess capital structure?
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How should fixed general corporate costs be treated in the expense modeling process?
How should fixed general corporate costs be treated in the expense modeling process?
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What is the primary distinction between private and public equity securities?
What is the primary distinction between private and public equity securities?
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Which factor does NOT affect market efficiency?
Which factor does NOT affect market efficiency?
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What is the primary purpose of financial intermediaries in the financial system?
What is the primary purpose of financial intermediaries in the financial system?
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Which is a characteristic unique to a well-functioning financial system?
Which is a characteristic unique to a well-functioning financial system?
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Which of the following is a common method for index construction?
Which of the following is a common method for index construction?
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What defines the concept of intrinsic value in the context of market efficiency?
What defines the concept of intrinsic value in the context of market efficiency?
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What is the primary function of equity indexes?
What is the primary function of equity indexes?
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Which of the following scenarios would likely indicate market inefficiency?
Which of the following scenarios would likely indicate market inefficiency?
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What role does volatility play in determining the risk-return profile of equity securities?
What role does volatility play in determining the risk-return profile of equity securities?
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Which of these components is NOT part of market efficiency?
Which of these components is NOT part of market efficiency?
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What is one key characteristic of a secondary market?
What is one key characteristic of a secondary market?
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In the context of financial markets, what does capital structure refer to?
In the context of financial markets, what does capital structure refer to?
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Which option best describes behavioral finance?
Which option best describes behavioral finance?
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How often should securities in an index be rebalanced according to index management principles?
How often should securities in an index be rebalanced according to index management principles?
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Study Notes
Equity Investments - JuiceNotes 2025
- This is a study guide for the Chartered Financial Analyst (CFA) Level I exam, version 3.
- The notes are updated monthly.
- Download the latest version at www.fintreeindia.com.
Index
- The document contains an index of topics, including page numbers.
- Topics include Market Organization & Structure, Security Market Indexes, Market Efficiency, Overview of Equity Securities, Company Analysis (Past & Present), Industry & Competitive Analysis, Company Analysis: Forecasting, and Equity Valuation.
Equity Investments
- Copyright and intellectual property rights for the course material belong to FinTree Education Private Limited.
- Unauthorized duplication is a violation of global copyright laws and the CFA Institute code of ethics.
- Contact [email protected] if you have any information about a potential violation.
- Unique user codes are included in the material to prevent unauthorized duplication. The user responsible for the violation will be identified and pursued.
FinTree Placement Services
- FinTree has a strong industry network through alumni and current student connections.
- The Placement Team uses these connections to provide placement opportunities to program participants.
- Program participants have lifelong access to FinTree Placement Services.
- Contact [email protected] for more details. This is available for selected programs. Details are available on the FinTree website.
Market Organization and Structure
- Main functions of the financial system:
- Allow entities to save and borrow money, raise capital, manage risks, and trade assets.
- Determine returns where total supply of savings equals total demand for borrowing.
- Allocate capital to its most efficient uses.
- Classification of assets:
- Financial assets (Securities, Derivatives, Currencies, Real Estate, Equipment, Commodities, Others).
- Real assets.
- Classification of markets:
- Based on trading (Primary Market, Secondary Market).
- Based on maturity (Money Market, Capital Market).
Securities
- Major types of assets traded in organized markets: Fixed income securities, Equity securities, Short-Term, Intermediate Term, Long-Term.
Contracts
- Forward contracts
- Futures contracts
- Option contracts
- Swap contracts
Commodities
- Trading in spot, forward, and futures markets.
- Includes precious metals, industrial metals, agricultural products, energy products, and credits for carbon reduction.
Real Assets
- Real assets include real estate, equipment, machinery.
- Buying real assets directly can provide income, tax advantages, diversification.
Financial Intermediaries
- Brokers, exchanges, alternative trading systems connect buyers and sellers.
- Dealers match buyers and sellers.
- Arbitrageurs and exchanges reduce counterparty risk and promote market integrity.
Market Efficiency
- Informationally efficient capital market: all available information is quickly and rationally reflected in the security's current price.
- Market's efficiency can be determined by the time taken for information to reflect in the price of the security.
- Market prices are not affected by information well anticipated. Only unexpected information causes price changes.
- Market value of a security is same as intrinsic value.
- Factors affecting market efficiency, including trading costs, number of participants, availability of information, impediments to arbitrage, short selling, and transaction and information costs.
- Different forms of market efficiency (Weak form, Semi-strong form, Strong form).
Market Anomalies
- Calendar anomalies (January effect).
- Overreaction anomalies (firms with poor recent returns can have better future returns).
- Momentum anomalies (high short-term returns followed by continued high returns).
- Size effect (Small-cap stocks outperform large-cap stocks).
- Value effect (Value stocks outperform growth stocks).
- Other anomalies (Closed-end funds trading at a discount to NAV, slow adjustments to earnings, and IPOs underpriced).
Equity Valuation Concepts
- Methods for determining if stocks are overvalued, undervalued, or fairly valued.
- Major valuation models:
- Discounted cash flow (present value)
- Multiplier model
- Asset-based model
- Background on the dividend discount model (DDM) and free cash flow to equity (FCFE) model.
- Share repurchase.
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