Most Common CFA Level 1 Questions and Topics

As the exam date approaches, we all want to make the best use of our time. The focus shifts to attempting practice exams and reviewing the most important concepts that we’re sure will hit the exam. But can we really know the CFA Level 1 questions that will be asked?

While no one knows what will be asked in the upcoming CFA level 1 exam, if we sit and analyze the syllabus and the available practice exams, we can identify some of the concepts that get their place in the exam paper more often than others. This is exactly what I plan to do with this article. I cannot point out the exact questions that will be asked in the exam. But I can definitely provide a list of the specific topics from the syllabus that have a very high chance of being questioned in the exam.

So here’s the list:

Financial Reporting

• Qualify cash flows into cash flows from financing, investing and operating activities.
• Calculate shares outstanding, or weighted average number of shares outstanding. This can get complicated specially when there are many share issues and repurchases.
• Calculate Free Cash Flow to the Firm (FCFF and FCFE)
• Calculate the interest expense and amortization of a bond issue.
• Accounting for leases
• Trade credit, especially calculating the cost of borrowing when using trade credit.
• Inventory: know how to convert inventory from LIFO to FIFO and vice versa.
• Calculate Earnings per Share and Diluted earnings per Share
• Difference between IFRS and US GAAP

Equity

• Calculate Price to Earnings ratio
• Value a stock using dividend growth model

Portfolio Theory

• Calculate covariance of returns
• CAPM

Fixed Income

• Calculate the duration and modified duration of a bond
• Calculate the clean/dirty price of a bond
• Calculate Bond Equivalent yield

Corporate Finance

• Calculate Beta
• Understand operating cycle and Cash Conversion Cycle

Quantitative Methods

• Harmonic Mean
• Confidence interval. You should definitely remember the z-values for different confidence intervals.
• Calculate NPV/IRR

Alternative Investments

• Value real estate using NOI

I would advise you to use this list only for review purposes and not as an exam preparation tool. The real exam will have 240 questions and the list above covers only 10% of it. So, the remaining 90% can be from anywhere in the syllabus. The recommended way to use it is to keep this list along while reviewing the study material and pay a bit more attention to these topics to make sure you can answer questions around them.

For others preparing for the exam, please share your experience about what you think are the most important questions/topics that one must prepare for.

If you need to practice more, please take a look at our mock exam for CFA Level I.