Learning Outcome Statements

Everything you need to know about the learning outcome statements (LOS) LOS - What They Are The primary goal of the CFA Program is to enable you to become an effective investment professional by teaching you the basic concepts and principles in 10 major topic areas. LOS are descriptions of specific knowledge, skills, and abilities (KSAs) that you should be able to apply after completing a reading and all associated exercises and problems. Each LOS includes a command word, such as demonstrate, formulate, or evaluate, that indicates the degree of understanding required. Reading-specific LOS are listed prior to each reading in the curriculum. LOS What They Are Not LOS are not intended to help you browse a reading to find simple facts that may be the subjects of exam questions. Readings may contain one or more paragraphs or pages that most directly relate to each LOS, but LOS do not have easy answers. Similarly, LOS should not be viewed as direct proxies for exam questions. How to Use LOS Read the LOS before you begin each reading to understand the primary learning objectives before you proceed. Keep in mind that the LOS should be pointing you to the most fundamental KSAs in the reading. Then proceed carefully through the reading. There is no substitute for reading the materials CFA Institute has selected and developed to teach the LOS. In readings developed for the CFA Program, the authors are charged with writing material to teach the KSAs specified in the Candidate Body of Knowledge (CBOK). The CBOK includes only KSAs that were identified as important by practicing investment professionals. Such readings are difficult to condense without losing important information. Many LOS reflect broad KSAs that you should be able to apply in different ways or in a variety of cases or scenarios. This is why it is critical that you study the examples in the readings and practice solving any problems that are assigned. Think about other ways to apply what you have learned. That is the best way for you to develop the targeted KSAs and prepare you to address investment challenges presented on the CFA exams. Exam questions are intended to test your ability to apply higher-order thinking and analysis to situations you can expect to face as an investment professional. In addition, you should be prepared to calculate any component of a model, given the remaining components. For example, a LOS that requires you to calculate present value will also support a question requiring the calculation of the discount rate, given present value, future value, and time. Each exam question is based on one or more LOS. You should be aware that exam questions, particularly at Levels II and III, may combine LOS from several readings, study sessions, and/or topics, especially for purposes of comparison, contrast, analysis, and synthesis. As noted above, the LOS should not be viewed as direct proxies for exam questions. Nevertheless, if you can accomplish the goals set forth in the LOS, you should be able to perform successfully on the exams. 1

After completing the reading, review the LOS and evaluate whether you have mastered the applicable content and achieved the target learning outcomes.

Candidate Body of Knowledge Topical Outline

I. Ethical and Professional Standards A. Professional Standards of Practice B. Ethical Practices II. Quantitative Methods A. Time Value of Money B. Probability C. Probability Distributions and Descriptive Statistics D. Sampling and Estimation E. Hypothesis Testing F. Correlation Analysis and Regression G. Time Series Analysis H. Simulation Analysis I. Technical Analysis III. Economics A. Market Forces of Supply and Demand B. The Firm and Industry Organization C. Measuring National Income and Growth D. Business Cycles E. The Monetary System F. Inflation G. International Trade and Capital Flows H. Currency Exchange Rates I. Monetary and Fiscal Policy 2

J. Economic Growth and Development K. Effects of Government Regulation L. Impact of Economic Factors on Investment Markets IV. Financial Reporting and Analysis A. Financial Reporting System (IFRS and GAAP) B. Principal Financial Statements C. Financial Reporting Quality D. Analysis of Inventories E. Analysis of Long-Lived Assets F. Analysis of Taxes G. Analysis of Debt H. Analysis of Off-Balance-Sheet Assets and Liabilities I. Analysis of Pensions, Stock Compensation, and Other Employee Benefits J. Analysis of Inter-Corporate Investments K. Analysis of Business Combinations L. Analysis of Global Operations M. Ratio and Financial Analysis IX. Alternative Investments A. Types of Alternative Investments and Their Characteristics B. Real Estate C. Private Equity/Venture Capital D. Hedge Funds E. Closely Held Companies and Inactively Traded Securities F. Distressed Securities/Bankruptcies G. Commodities H. Tangible Assets with Low Liquidity 3

V. Corporate Finance A. Corporate Governance B. Dividend Policy C. Capital Investment Decisions D. Business and Financial Risk E. Long-Term Financial Policy F. Short-Term Financial Policy G. Mergers and Acquisitions and Corporate Restructuring VI. Equity Investments A. Types of Equity Securities and Their Characteristics B. Equity Markets: Characteristics, Institutions, and Benchmarks C. Fundamental Analysis (Sector, Industry, Company) and the Valuation of Individual Equity Securities D. Equity Market Valuation and Return Analysis E. Special Applications of Fundamental Analysis (Residual Earnings) F. Equity of Hybrid Investment Vehicles VII. Fixed Income A. Types of Fixed-Income Securities and Their Characteristics B. Fixed-Income Markets: Characteristics, Institutions, and Benchmarks C. Fixed-Income Valuation (Sector, Industry, Company) and Return Analysis D. Term Structure Determination and Yield Spreads E. Analysis of Interest Rate Risk F. Analysis of Credit Risk G. Valuing Bonds with Embedded Options H. Structured Products VIII. Derivatives A. Types of Derivative Instruments and Their Characteristics 4

B. Forward Markets and Instruments C. Futures Markets and Instruments D. Options Markets and Instruments E. Swaps Markets and Instruments F. Credit Derivatives Markets and Instruments X. Portfolio Management and Wealth Planning A. Portfolio Concepts B. Management of Individual/Family Investor Portfolios C. Management of Institutional Investor Portfolios D. Pension Plans and Employee Benefit Funds E. Investment Manager Selection F. Other Institutional Investors G. Mutual Funds, Pooled Funds, and ETFs H. Economic Analysis and Setting Capital Market Expectations I. Tax Efficiency J. Asset Allocation (including Currency Overlay) K. Portfolio Construction and Revision L. Equity Portfolio Management Strategies M. Fixed-Income Portfolio Management Strategies N. Alternative Investments Management Strategies O. Risk Management P. Execution of Portfolio Decisions (Trading) Q. Performance Evaluation R. Presentation of Performance Results

CFA Exam Topic Area Weights

Topic Area Ethical and Professional Standards (total) Quantitative Methods Economic Financial Reporting and Analysis Corporate Finance Investment Tools (total) Equity Investments Fixed Income Derivatives Alternative Investments Asset Classes (total) Portfolio Management and Wealth Planning (total) Total Level I 15 12 10 20 8 50 10 12 5 3 30 5 100 Level II 10 5-10 5-10 15-25 5-15 30-60 20-30 5-15 5-15 5-15 35-75 5-15 100 Level III 10 0 0 0 0 0 5-15 10-20 5-15 5-15 35-45 45-55 100

Note: These weights are intended to guide the curriculum and exam development processes. Actual exam weights may vary slightly from year to year. Please note that some topics are combined for testing purposes.

LOS Command Words

The reading-specific learning outcome statements (LOS) contained in the study sessions are carefully designed to indicate what you should learn from each assignment. Although the format of the exams may not lend itself to using the following command words in the actual questions, you should be able to answer the exam questions if you can successfully accomplish the learning outcomes described by these command words in the LOS.

Commonly used command words: To study or determine the nature and relationship of the parts of by analysis. Analyze To judge and analyze the worth, significance, or status of. Appraise To put into a proper order or into a correct or suitable sequence, relationship, Arrange or adjustment. To ascertain or determine by mathematical processes. Calculate Characterize To describe the essential character or quality of. To quote by way of evidence, authority, or proof. Cite To arrange in classes; to assign to a category. Classify To bring into such close relationship as to obscure individual characteristics. Combine To observe, remark, or express an opinion or attitude concerning what has Comment been seen or heard about the subject at hand. To examine the character or qualities of, for the primary purpose of Compare discovering resemblances. 6

Compose Compute Conclude Construct Contrast Convert Create Criticize

To form by putting together; to form the substance of. To determine, especially by mathematical means.

To make a decision about; to reach a logically necessary end by reasoning. To create by organizing ideas or concepts logically and coherently. To compare in respect to differences. To change from one form or function to another. To produce or bring about by a course of action or imaginative skill. To consider the merits and demerits of and judge accordingly; to find fault with. To offer a critical review or commentary. Critique To set forth the meaning of; specifically, to formulate a definition of. Define Demonstrate To prove or make clear by reasoning or evidence; to illustrate and explain, especially with examples. To transmit a mental image, an impression, or an understanding of the nature Describe and characteristics of. To conceive or plan out in the mind. Design Determine To come to a decision as the result of investigation or reasoning; to settle or decide by choice among alternatives or possibilities. To represent by or put into the form of a diagram. Diagram Differentiate To mark or show a difference in; to develop different characteristics in. Discriminate To mark or perceive the distinguishing or peculiar features of; to distinguish by discerning or exposing differences. Discuss Distinguish Draft Draw Estimate Evaluate Explain Formulate Give Identify Illustrate Indicate Infer Interpret Judge To discourse about through reasoning or argument; to present in detail. To perceive a difference in; to separate into kinds, classes, or categories. To draw up, compose, prepare, frame. To express graphically in words; to delineate. To judge the value, worth, or significance of. To determine or fix the value of; to determine the significance or worth of, usually by careful appraisal and study. To give the meaning or significance of; to provide an understanding of; to give the reason for or cause of. To put into a systematized statement or expression; to prepare according to a formula. To yield or furnish as a product, consequence, or effect; to offer for the consideration, acceptance, or use of another. To establish the identity of; to show or prove the sameness of. To make clear, especially by giving examples or instances. To point out or point to with more or less exactness; to show or make known with a fair degree of certainty. To derive as a conclusion from factors or premises. To explain or tell the meaning of; to present in understandable terms. To form an opinion about through careful weighing of evidence and testing of premises. 7

To prove or show to be valid, sound, or conforming to fact or reason; to furnish grounds or evidence for. To enumerate. List To pair up or put in a set as possessing equal or harmonizing attributes. Match To make minor changes to give a new orientation to or to serve a new end. Modify Name To mention or identify by name. To put in order; to arrange. Order To indicate the principal features or different parts of. Outline To declare in advance; to foretell on the basis of observation, experience, or Predict reason. To put into written form; to draw up. Prepare To offer or convey by way of message; to furnish or provide. Present To put back into proper order or into a correct or suitable sequence, Rearrange relationship, or adjustment. Recommend To bring forward as being fit or worthy; to indicate as being one's choice for something or as otherwise having one's approval or support. To set down in writing; to make an answer. Record To show or establish logical or causal connection between. Relate To say or write something in return; to make an answer. Respond To state again in a new form. Restate To make a formal or official examination of the state of; to go over or Review examine critically or deliberately. Justify Revise Select Separate Show Solve State Subdivide Summarize Support Write To make a new, amended, improved, or up-to-date version of. To choose from a number or group -- usually, by fitness, excellence, or other distinguishing feature. To set or keep apart; to make a distinction between; to sort. To set forth in a statement, account, or description; to make evident or clear. To find a solution for a problem. To express in words. To divide the parts into more parts. To tell in or reduce to a summary. To provide with verification, corroboration, or substantiation. To put on paper; to record, state, or explain.