Corporate Finance - Introduction

The material set forth in this chapter will comprise approximately 8% of the questions on your upcoming CFA Level 1 examination. Keep in mind that CFA Institute's exam questions are comprehensive. Be sure to know not only what these topics are, but how they relate to each other.

Within this section, we will discuss the agency problems associated with the agent-principal relationship, the calculations and uses of the cost of capital in capital budgeting, the calculations and applications of Net Present Value (NPV), the types of risks and risk analysis techniques, the effect of leverage on a company or project's return, and the various dividend theories and related calculations.


Agent-Principle Relationship


Related Articles
  1. Professionals

    An Introduction To The CFA Designation

    The CFA designation is seen as the key certification for investment professionals. Find out what the CFA signifies for candidates and investors.
  2. Financial Advisors

    Tips on Passing the CFA Level I on Your First Attempt

    Obtain valuable tips and helpful study instructions that can help you pass the Level 1 Chartered Financial Analyst exam on your first attempt.
  3. Financial Advisors

    MBA or CFA: Which Is Better for a Career in Finance?

    Potential financial advisors, analysts or asset managers have many credentials and degrees from which to choose. Here's a look at the CFA vs. the MBA.
  4. Professionals

    What To Expect On The CFA Level II Exam

    This article will help you understand the nuances of the CFA Level II exam.
  5. Trading Strategies

    How Useful Is the CFA For A Day Trading Career?

    We take a look at how useful the Chartered Financial Analyst certification is for those wanting to start a career in day trading.
  6. Professionals

    Pass Your CFA Exams on the First Try

    Become one of the elite who pass these exams by using these simple study methods.
  7. Professionals

    Study Does Not End After The CFA

    Getting your CFA is an admirable achievement, but it doesn't end there. Find out what is expected of CFAs after they become charterholders.
  8. Career Education & Resources

    How Hard are the CFA Exams?

    Learn about the difficulty of the CFA exams with a description of the tests, some statistics on pass rates and suggestions that can help you pass the exams.
  9. Professionals

    How to Prepare for the CFA Exams

    To pass the CFA exam, get organized, develop an effective study program and review.
  10. Professionals

    What's on the CFA Level II Exam?

    The Chartered Financial Analyst Level II exam is the second of three tests that CFA candidates must pass.
RELATED TERMS
  1. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly ...
  2. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present ...
  3. Net Present Value Rule

    A rule stating that an investment should be accepted if its net ...
  4. Capital Investment Analysis

    A budgeting procedure that companies and government agencies ...
  5. Financial Analysts Journal - FAJ

    A financial publication circulated by the CFA Institute. The ...
  6. Historic Pricing

    A method for calculating the value of an asset using the last ...
RELATED FAQS
  1. Do I have to complete all exams within a certain period of time to receive the CFA ...

    According to the CFA Institute, a candidate can take as much time as necessary to complete all three levels of the CFA program.Therefore, ... Read Answer >>
  2. Which one of the following uses of the "CFA" trademark is correct ...

    The correct answer is e. The correct use the CFA abbreviation is one the most important things to know as a CFA candidate. ... Read Answer >>
  3. I am interested in pursing the CFA charter, but I do not have a degree in business ...

    The Chartered Financial Analyst (CFA) program is by no means an introduction to the world of investment. CFA Institute (formerly ... Read Answer >>
  4. How do I become a CFA charterholder?

    The CFA Institute requires individuals to satisfy a number of steps to become CFA charterholders.The most widely known requirement ... Read Answer >>
  5. If I already hold a professional certification am I eligible for any exemptions from ...

    No. To obtain a CFA designation, you must complete all levels of the CFA program regardless of whether you hold a professional ... Read Answer >>
  6. Do you discount working capital in net present value (NPV)?

    Learn why changes in net working capital (NPV) should be included in net present value calculations for analyzing a project's ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center