@edulima
Forum Replies Created
-
Posts
-
Up5
dctomm, I think you need to make a deep reflection into how you want to spend the next few years in your career. You may have another 15 (plus or minus 5) years to go before retirement. I believe this is enough to make a whole new career and be successful in it – whether this is in finance or something else, this is something only you can determine. For sure the CFA program is a big investment you need to make up-front if you are to choose finance as your next career, but you should take the long-term view. If you fall in love with finance, then these exams will take you a couple of years to get through, and you also need to devise a plan to find a job in the field. Transitioning from your current role sounds like a good option, but again, you need to explore these possibilities.
If you are not sure whether you like finance enough to go for it, you may want to put yourself through the Level 1 exam and “try your hand” at it; this experience may bring you some revelation and at that point you can consider whether to keep going or halt it. Worst case scenario at that point: you decide finance is not your thing and spent a few months studying the subject; you ended up learning some finance and reached a conclusion that you’re not born for this. Best case scenario: you found your thing and are 1 exam down, 2 to go. So I’d say “go for it” if you feel there’s a chance this is your thing.
Up5I think that if you are doing a part-time MBA and working full time, for most MBA programs the subjects you cover in the first year can be very similar to the contents of the Level 1 exam. Because of these synergies, it might be a waste of opportunity not to take advantage of this. Another question is whether one should try Level 2 and then Level 3 while still in an MBA program; the upshot is you’d get out of your MBA with a CFA in the pocket at the same time… Has anyone done something like this?
If you are in a full-time MBA program, but not working, this reasoning applies in a similar way, except that full-time MBAs are more intense and they only last 2 years. So it may be harder to do CFA during the studies.
Up5Thought I’d add to the excellent comments already provided here…
I believe one of the most important aspects of preparing for such a killer exam is the determination you need to incorporate in your behavior when executing your plan. The exact format of your study plan can vary; for example, I count pages and problems and divide them up by the number of available weeks (excluding the last month or so for mock), which results in an assignment of a (hopefully) reasonable number of pages and review problems per week.
Such a plan (including any reasonable variations) can only translate into success when coupled with the “almost obsessed” determination to execute it with full honesty — in that you go for each concept, don’t skip and don’t sleep over your book — and minimal adjustments to the schedule.
This, IMHO, is the key to success. Let’s go @stt00007, you can do it!
Up5@Dan, @Sophie, Another possibility could be to sign-up for a course on reading and interpreting Financial Statements, hopefully you can find one that would follow the book “International Financial Statement Analysis” by Robinson et al, which is pretty much the CFAI readings on FRA. A hands-on, MBA-type course on the subject would add a lot of color to the learning: you’d go out and actually look at companies’ annual reports and play “detective” in trying to figure out if they’re hiding anything… I’ve done this and it is very, very cool.
Up5Hi @Sophie, thanks for checking.
Going well for me. I’m following the “chrono” order and have covered the first 2 books so far (Ethics & Quant + Economics), diving now into FRA which will be a review for the most part for me (I took a course on this not long ago). I found Econ to be difficult at times, but very interesting and felt I learned a lot.
My target is to be done with this detailed pass through the whole material by late October, and so far it looks attainable – a lot of hard work, though… here’s what I’m doing: first I carefully read a chapter (CFAI “reading”) while highlighting it, then I read it again a bit faster (just the highlights), while writing up my summary (in a mind-map type interface), and then I go over my summary and do the EOC problems.
When I’m done w/ book 6 I’ll buy a question bank from a provider (haven’t decided which one yet) and will do those while reviewing my summaries, and then will do a few mock exams as we move into December. Hope to be very sharp on Dec 7.
Let me know how this sounds to you.
Up5Hi @belfastcandidate, if you can’t deviate much from the in-depth style, why don’t you defer your exam till June ’14? Although I am exam focused (in that I try EOC questions and will take the last month to do q-banks and mock exams), I like to spend enough time to understand what I’m studying. The only way to reconcile the two is by starting early and keeping a strong pace throughout the prep time.
Up5I hear you @belfastcandidate, I’m in a similar position as you: doing this more for the learning and a title would not be refused. :>
Up5It depends on your style, goals, budget, etc. I am sitting for Level 1 in December and am using only the the CFA ebook (plus a Qbank and some mock exams for practice questions in the last month). I write-up my own summary after finishing each reading.
Up5I use the HP 12C calculator and love it (been using it for years). Agree with @justinturner on just about everything above, and I heard somewhere that using the sequence of steps in the 12C for a given calculation, the number of needed keystrokes is always the same or less than for a more “normal” calculator.
Up5Sorry to resuscitate the discussion, but I agree with the original comment that LIFO-Reserves do not decrease due to LIFO liquidation. In fact, there are only two instances when LIFO-Reserves decrease:
(1) in a deflationary environment — a less typical situation — and
(2) when one changes the method from LIFO to FIFO — trivial case when the LIFO-Reserve disappears
—Let’s look at the math: From the definition of LIFO-Reserve:
LIFO-Reserve = FIFO-Inventory – LIFO-Inventory
so that
Change in LIFO-Reserve = Change in FIFO-Inventory – Change in LIFO-Inventory
But each change in inventory is given by:
Change in FIFO-Inventory = Units purchased * Current Cost of Purchase – Units sold * FIFO-COGS
Change in LIFO-Inventory = Units purchased * Current Cost of Purchase – Units sold * LIFO-COGSwhere COGS is “cost of goods sold per unit”. Substituting:
Change in LIFO-Reserve = Units sold * (LIFO-COGS – FIFO-COGS)
This amount is always positive in an inflationary environment and always negative in a deflationary environment, which covers case (1) above. Note that the change in inventory units (units purchased – units sold) will not affect the sign of the change in LIFO-Reserve.
So what is a LIFO liquidation?
A LIFO liquidation is NOT (and it does not cause) a decrease in LIFO-Reserve. A LIFO liquidation is a decrease in inventory units (when one is using the LIFO method), in other words, it’s the result of “burning” old inventory which was bought at prices lower than current prices (in the typical inflationary environment) but still higher than the costs accounted under FIFO. In an inflationary environment, a LIFO liquidation causes a smaller increase in the LIFO-Reserve than what would have been if instead the inventory units had not decreased during the period (that is, the company had produced at least the same amount that it sold during the period). In the less typical deflationary environment, it causes a smaller decrease in the LIFO-Reserve than what would have been otherwise.
So instead of looking for a decrease in LIFO-Reserve in order to find the possibility of earnings management, one needs to look for small increases in LIFO-Reserve, since that is what characterizes a LIFO liquidation.
Any comments, challenges, etc. are very welcome!
Up5I take this all back… (yeah, it’s late). I have just seen a counter-example where there is a decrease in LIFO-Reserve in a LIFO liquidation situation, and it’s not a deflationary environment. Rather than try to re-prove it mathematically, I’ll simply accept that the above calculations are perhaps too simplistic.
Up5I’m on Study Session 8 (Corporate Finance), but I skipped Study Session 4 (Econ) as I’m leaving it for the end. For each reading, I’m reading & highlighting CFAI, then reviewing on Schweser (making my notes there), then back to CFAI to do EOC problems. Leaving concept checkers to the last month along with Q-banks and mocks.
@Maroon5, I actually think the last month is where the “fun” begins, not the pain. To me it’s a bit more painful to cover all the ground for the first time: it’s long and a bit stressful in that you need to understand everything, try to lodge it somewhere in your long-term memory, and at the same time move as fast as possible since you need to leave a full month for reviews & practice (can’t really afford to lose a week). My final review of Level 1 a few months ago was the time when I had the most fun, as I was putting all pieces together from the previous readings… lots of “aha” moments.Up5Good stuff, @justinturner‌, I like trying different things but always keeping the intensity high. I also alternated between pieces of mock and reviewing the material, and I think it did help.
I also agree with your thoughts on having the big picture at this point. I really hope I pass, because I look forward to what Level 3 has in store for us…
Up5As I understood, the question to be answered is: what is the return on your investment in this particular situation? Except for his/her last sentence, I agree with @d3v1l_dare. However, the way I would approach this situation is to build my understanding in steps.
1) Consider first the much simpler case where the outflows (-24,000) all occur on May 1, 2014 (time t=0) and the payback (32,405.55) occurs on May 1, 2015 (time t=1). The ROI is 35.02% (=32,405.55/24,000 – 1) and it is an annual rate, since the holding period was 1 year. You would want to go ahead with this investment if this ROI were greater than your opportunity cost of capital (what you would get by investing in your next best project).
2) Next consider the case where the outflows still occur on May 1, 2014 (time t=0) but the payback (32,405.55) occurs on May 1, 2016 (time t=2), which is closer to your situation. The ROI is still 35.02% but this is now a 2-year figure. The equivalent annual rate of return on the investment is 16.20% [ = (32,405.55/24,000)^1/2 – 1]. It makes sense that the rate is much lower because now you have to wait twice as long to get your return. Again, if your required rate of return is less than this 16.2% figure, then it’s a go.
3) Finally, we want to consider the staggered cash outflows, as 8 monthly instalments of $3,000 from May 1, 2014 to December 1, 2014, which is exactly the situation proposed. The problem here is that each piece of your total investment will be “tied up” for a different length of time, so you see how a similar calculation as with the 2 simpler cases above would be difficult. The best way to resolve this is to first figure out what is your opportunity cost of capital (or required rate of return). Suppose it is 10%. Then you calculate the PV of your cash flows using this rate; since the net result is positive (=3,435.56), it’s a go for the investment. (If it were negative, it would be a no go!)
Note that this more general methodology (used in case 3) will give exactly the same answer as what we got in cases 1 and 2 above for a 10% required rate of return.
Finally, if you want to know what is the maximum required rate of return for which the project would be accepted, then you would calculate the IRR for the cash flows, which is an annual rate of 19.18% (equivalent to a monthly rate of 1.4728%, as calculated by @d3v1l_dare). Of course, you should not discount the cash flows with this rate… if you did, you’d get a zero NPV (it’s the definition of the IRR).
Hope this helps!
Up5A reasonably smart person can probably pass the exam by doing less than 7 full mocks, but then again, this is such a qualitative statement (even when you put a number in there it doesn’t make it much quantitative…) I certainly did not count how many questions I did, but I guess it was in that order of magnitude.
The important thing really is that you finish going through the material early enough and with a good enough understanding of it, so that you have enough time (say 1 month) to go out and practice under exam conditions. Doing EOC after each reading should be enough to cement some of that understanding and not too many to keep you moving through the whole thing.
In other words, passing the CFA exam (for a reasonably smart person) is a lot more an issue of endurance, discipline and hard work than it is of figuring out the magic way to pass the exam.
Up4Indeed an amazing technique, @microeconomist, I am very interested and would love to try this out. I wonder if there is some variation of it that you can try when self-studying… Also, when do you add the “visual” aspect of the learning (for those who are more “visual” than “listening”). And finally, when you say you used this for every econ/stat class thereafter, did it matter that the profs may not necessarily have done the class in a similar way as your unconventional prof?
