The chartered financial analyst (CFA) is an international professional designation offered through the CFA Institute, awarded following the completion of three exams. It is a prestigious title in the finance and investment sectors and should at least be considered by anyone interested in a career in corporate finance. The CFA is a worthwhile venture in some cases, while in other cases, it is more advisable to pursue a master's degree in business administration (MBA) or even a Chartered Alternative Investment Analyst (CAIA) designation.
It is not easy to earn the CFA title and the time, effort, and money required for the designation are substantial. It takes more than four years and under $5,000 to pass the tests. However, note that your employer might cover the costs or reimburse you after you pass the exams.
Corporate Finance in the CFA Exams
The CFA is broken into three levels, often called simply L1, L2, and L3. As of 2022, 8% to 12% of the first exam covered corporate finance topics. The second exam varies from year to year, but corporate finance topics typically cover between 5% and 10% of the exam. The third level often gets no corporate finance emphasis.
Portfolio Management, Equity Research, and Hedge Funds
As a general qualifier, the CFA designation never hurts. However, certain parts of the curriculum apply more to corporate finance careers than others. Corporate finance is a somewhat nebulous term, but the CFA exams cover typical areas in the field, such as working capital management, budgeting, leveraging, foreign exchange, and all associated research.
The CFA Institute has self-reporting data from its charter holders up to 2021. At that time, there were more than 167,000 charter holders. Twenty-five percent of global CFA professionals were portfolio managers, the most common profession. The second-highest reported job function was research analyst at 12% globally, followed by consulting, at 10%.
Hedge fund analysts often perform similar duties as equity researchers for big fund managers and a CFA designation can help the credentials of a professional trying to break into the buy-side of investing. This may or may not be considered corporate finance, depending on where the job is located. For example, corporate finance in the United States is often a synonym for financial planning, accounting, and analysis. However, in the United Kingdom, corporate finance extends further into investment banking or hedge fund activity.
Is Your Employer a Charter Holder?
Whether or not you pursue a CFA may depend on the company where you want to work. Suppose you want to work for a multibillion-dollar corporation or even a multinational with a sizable treasury department. If the treasurer for the company is a CFA charter holder, which is more likely for large firms, then the CFA is potentially useful. Having this designation in your resume should help you against non-CFA candidates for career advancement, and the training involved with preparing for the CFA exam should help with advanced functions, such as foreign exchange transactions or international equity research, that larger firms tend to need.
The CFA curriculum is broad and not particularly deep. For many specialized professions, such as corporate accounting or capital financing, a more specific degree or designation might be more useful. For many corporate finance jobs, you might be better off with a master's degree in finance.
If You Are Just Starting Out
Many Fortune 500 finance and investment companies use the MBA as a filter for applicants. The MBA has higher costs and generally takes more total time to complete than the CFA. Furthermore, the total number and range of opportunities for young professionals with an MBA are much wider than for those with a CFA.
What Roles in Corporate Finance Are Applicable to the CFA?
There are many roles in corporate finance that a CFA helps prepare a candidate for, including research analysts, equity analysts, portfolio managers, chief financial officers, and corporate financial analysts.
What Corporate Finance Topics Does the CFA Cover?
The CFA covers a variety of corporate finance topics, such as budgeting, leveraging, portfolio management, working capital management, and foreign exchange.
What Are the Main Activities of Corporate Finance?
Generally speaking, corporate finance focuses on the activities that help maximize shareholder value in both the short and long term. Capital investment, taxation, and overseeing capital investment decisions are among the activities that fall under the corporate finance umbrella.
What Portion of the CFA Exam Is On Corporate Finance?
Across Level I and II of the CFA exams, corporate finance make up 8% to 12% of the total questions. There are no corporate finance questions for the Level III exam.
In the Level II exam, corporate finance questions will surround capital budgeting, corporate governance, capital structure, and mergers and acquisitions, among others.