- CFA Exams
- 2022 Level II
- Study Session 10. Equity Valuation (2)
- Reading 26. Industry and Company Analysis
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Learning Outcome Statements PDF Download
| 1. Income statement modeling: revenue a. compare top-down, bottom-up, and hybrid approaches for developing inputs to equity valuation models; b. compare "growth relative to GDP growth" and "market growth and market share" approaches to forecasting revenue; | |
| 2. Income statement modeling: operating costs and non-operating costs c. evaluate whether economies of scale are present in an industry by analyzing operating margins and sales levels; d. forecast the following costs: cost of goods sold, selling general and administrative costs, financing costs, and income taxes; | |
| 3. Balance sheet and cash flow statement modeling e. describe approaches to balance sheet modeling; f. describe the relationship between return on invested capital and competitive advantage; | |
| 4. The impact of competitive factors on prices and costs g. explain how competitive factors affect prices and costs; h. judge the competitive position of a company based on a Porter's five forces analysis; | |
| 5. Inflation and deflation i. explain how to forecast industry and company sales and costs when they are subject to price inflation or deflation; | |
| 6. Technological developments j. evaluate the effects of technological developments on demand, selling prices, costs, and margins; | |
| 7. Long-term forecasting k. explain considerations in the choice of an explicit forecast horizon; l. explain an analyst's choices in developing projections beyond the short-term forecast horizon; m. demonstrate the development of a sales-based pro forma company model. |
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